Kuwait’s Investment Dar has offered to hand assets to creditors immediately, a source close to the company said on Thursday, in a bid to win them over to its latest plan to restructure debts of KD 813m ($2.7bn).
This represents a significant shift in the stand-off with its lenders, but any deal is complicated by legal claims over Investment Dar’s assets and the need for it to gain sufficient support from creditors wary after previous failed debt plans.
Investment Dar, whose assets include a stake a property firm which owns some of Dubai’s The World artificial islands project, has had mixed success in restructuring its debts since getting into trouble during the financial crisis.
Its latest attempt, called Al Sharq, differs from previous plans in that it promises to immediately hand over control of assets in the company to creditors, while also guaranteeing that shareholders will not get paid until all creditors are paid, said the source close to the company.
The previous plan would have handed over assets depending on the level of support, but failed after Kuwait’s Court of Appeal in February rejected an application to impose it on all creditors.
Among the obstacles faced by the new plan is a claim being made by Kuwait Finance House (KFH), one of Investment Dar’s largest creditors, on its assets through the Kuwaiti courts, according to sources familiar with the matter.
A decision on this case was likely to be announced in the next few months, the sources said.
And the position of Saudi Arabia’s Al Rajhi Bank, the investment firm’s largest creditor, is also unclear.
KFH and Al Rajhi Bank did not respond to requests for comment.
Another creditor, who asked to remain anonymous, told Reuters it would be not signing up to the latest plan because after previous failed restructuring attempts it wanted to pursue payment from the company for unpaid debt outside of the courts.
A source close to Investment Dar said while it did not require complete creditor approval, greater support would help guarantee success for the plan when Kuwaiti court approval is eventually sought.
While there are a handful of claims from creditors not interested in a consensual plan, a significant number were only pursuing litigation to protect their position and supported the Al Sharq proposal, the source added.
Another complication is that Investment Dar is in a legal dispute with Commercial Bank of Kuwait over part of its nearly 20 percent stake in Kuwait’s Boubyan Bank which is one of the assets it aims to hand over to creditors.