U.S. law firm King & Spalding has advised Kuwait-based Warba Bank on the $475 million financing provided to Kuwait’s National Industries Group Holding to repay its Islamic bond, two sources confirmed to the TheBrief. The deal involves the first ever sharia-compliant exchangeable financing in the Middle East.
The deal comes after NIG, an investment firm controlled by the Kharafi family, one of the country's biggest merchant families, dropped its earlier plans of obtaining a four-year extension from creditors. The firm asked creditors in July to extend 70 percent of the Islamic bond, or sukuk, maturity to 2016 in exchange for a much higher interest rate. NIG said it would repay 30 percent of the $475 million total on the Aug. 16 due date but under a revised structure, which sukukholders had until August 9 to agree to.
NIG would repay 25 percent of the principal amount at the end of each of the four years the sukuk was extended for. International firm Allen & Overy had originally been appointed to advise on the consent solicitation for the extension of the sukuk.
While about 92 percent of certificate holders had approved the extension, the request had been cancelled because NIG has raised enough finance from local lender Warba Bank to fully repay the sukuk.
A number of Kuwaiti firms have struggled with refinancing debt obligations in the wake of the 2008 financial crisis. These investment firms borrowed cheap short-term cash in the boom years to fund an asset-buying spree, both locally and overseas, but found they couldn't refinance the debt once borrowing costs rose. Offloading assets at deflated values has also proven difficult in a stagnant market.
Several Kuwaiti investment firms have been hard hit, including Investment Dar, co-owner of luxury carmaker Aston Martin, International Investment Group and International Leasing and Investment Co. Global Investment House, in the midst of its second restructuring in three years, said last week that it would seek shareholders approval for a debt-for-equity swap which will see creditors own 70 percent of the company.
Shaheen Pasha is Middle East Regional Editor at ALB. Follow us on Twitter: @ALB_TheBrief.
Other related stories:
