* Latest Kuwaiti investment firm to seek debt restructuring
* NIG proposes to repay 30 pct, term out rest of sukuk due
* Repayment over four yrs, much higher coupon if creditors
* Shares in NIG, controlled by the Kharafi Group, end 1.9
By David French
DUBAI, July 22 National Industries Group Holding
(NIG), a Kuwaiti investment firm controlled by one
of the country's biggest family conglomerates, has asked
creditors for a four-year extension on a $475-million Islamic
bond, or sukuk, maturing next month.
The request from NIG, part of the Kharafi Group, is the
latest debt issue to surface in the Kuwaiti investment sector,
which was hard hit by the 2008 global financial crisis.
Firms who borrowed cheap short-term cash in the boom years
to fund an asset-buying spree, both locally and overseas, found
they could not refinance the debt once borrowing costs rose.
Offloading assets at deflated values in a stagnant private
equity market has proven difficult.
"(NIG's) debt profile has always been skewed towards
short-term debt, leaving it vulnerable to refinancing risk,"
Ahmad Alanani, a senior executive at investment bank Exotix,
said on Sunday.
"It is the classic asset to liability mismatch that plagues
many companies in the region."
Several Kuwaiti investment firms have faced debt problems,
including Investment Dar, co-owner of luxury carmarker Aston
Martin, International Investment Group and
International Leasing and Investment Co.
Global Investment House is currently in the midst
of its second restructuring in three years, having said in
September that it needed to renegotiate a $1.7-billion debt plan
agreed in 2009.
The Kharafi Group, which owns NIG, is one of the biggest
family conglomerates in Kuwait with interests in real estate,
retail and financial services. It is thought to control, through
various entities, around a quarter of telecom operator Zain
In a statement to the London Stock Exchange where the sukuk
is listed, NIG said it will repay 30 percent of the $475 million
total on the August 16 due date but requested an extension on
the remainder of the sukuk up to 2016.
Under the revised structure, which sukukholders have until
August 9 to agree to, NIG will repay 25 percent of the principal
amount at the end of each of the four years; akin to an
amortising structure, rather than a bullet repayment - in which
the borrowed sum is paid back at the end of the term.
The profit rate will also be amended from a floating rate of
three-month Libor plus 105 basis points to a fixed rate of 450
basis points - much higher than the 151.59 bps paid out at the
last coupon payment in May.
Creditors who agree to the restructuring by August 6 will
receive a variable early consent fee. Citigroup is acting
as solicitation agent, along with local firm Watani Investment
"Reading between the lines, they wouldn't have come to
market with this offer if they hadn't already surveyed their key
lenders and felt that they had a good chance of getting a
majority of them to consent," said Alanani.
The 30 percent initial payment and the early consent fees
will be financed by a 100 million dinar ($354.4 million)
three-year sharia-compliant loan that will be arranged before
the sukuk is originally due to mature, the statement said.
The facility, being arranged by Warba Bank, was rated as
credit positive by Moody's in May as it would help to address
short-term liquidity issues, including the sukuk repayment. NIG
had around 85 million dinars of cash on its balance sheet at the
end of March, according to Moody's.
"It was a foregone conclusion that the company didn't have
sufficient resources to repay the sukuk in full and on time,"
Alanani said. "But the timing was a bit of a surprise given they
had recently raised some debt financing through local banks and
it was assumed the proceeds were to be used to repay the sukuk."
NIG's sukuk was bid at a cash price of 99.4
cents on the dollar on Friday, to yield just under 11.9 percent,
according to Thomson Reuters data. The sukuk has rarely traded
in the last couple of years.
Shares in NIG ended nearly 2 percent lower on Sunday, taking
year-to-date losses to 22.3 percent. By comparison, the Kuwait
bourse, is up 0.5 percent on the year.
($1 = 0.2822 Kuwaiti dinars)
(Additional reporting by Rachna Uppal; Editing by Amran Abocar)