Kuwait’s Investment Dar Confident About Debt-For-Assets Deal

Kuwait’s Investment Dar remains on track to agree the bulk of a KD813 million ($2.8 billion) debt restructuring plan despite resistance by some minority investors, according to a company document seen by Reuters.

The firm, which holds a stake in luxury carmaker Aston Martin, has secured about 60 per cent support for the plan, which involves creditors voluntarily exchanging debt for a direct debt claim and equity stake in a new holding company to be given ownership of all Investment Dar’s assets, according to a presentation for lenders seen by Reuters.

It is the latest attempt by Investment Dar to pay off creditors after sinking into debt problems during the global financial crisis. It was reorganised under Kuwait’s Financial Stability Law – introduced in 2009 to assist debt negotiations in the absence of effective insolvency rules.

Its original debt deal was signed in 2011 and covered around KD1 billion. Since then, it has paid off some creditors and others took up a settlement-in-kind offer which involved swapping debt for a stake in a pool of assets.

“The transaction is precedent setting for the Middle East in that it…hands over control to creditors in an organised manner to maximise recovery,” Arun Reddy, director at Houlihan Lokey, Investment Dar’s transaction adviser, told Reuters.

Last week, however, Kuwait Finance House (KFH), the Gulf state’s largest sharia-compliant bank by assets, rejected the plan and vowed to take all possible legal measures to collect the debt it is owed.

KFH holds about six per cent of the debt Investment Dar is aiming to restructure, according to an official email seen by Reuters. At least one other creditor is believed to have not yet agreed to the offer, it said.

Not agreeing to the proposal meant creditors would retain their claim at Investment Dar, which in turn would hold a claim at the holding company for the outstanding amount it owed, according to the presentation. As a result, it offered dissenting creditors less of a direct claim at the vehicle and no say in how it would manage the 35 to 40 assets under its control, it said.

Assets set to be in the holding company include those in the financial services, logistics, property and education sectors. However, its Aston Martin stake will not be, having been pledged in the previous settlement-in-kind offer.

Creditors have until March 31 to decide whether they will sign up to the plan. If it gains 67 per cent backing, creditors will be ensured 90 per cent of the holding company’s equity. The proposal has already passed the 55 per cent threshold which guarantees them control of the board.