The Investment Dar Co. Restructuring Update

The Investment Dar Co. Restructuring Update
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Published November 28th, 2010 - 14:12 GMT

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Dubai
,
Young
,
Central Bank of Kuwait
,
TID Board
,
CC
,
Kuwaiti Special Circuit Court
,
Coordinating Committee

Following a meeting of The Board of Directors ("the Board") of The Investment Dar on the 25 November 2010, the Company issues the following update on its financial restructuring.

On the 24 November 2010, the Chairman of TID board received a letter from the Coordinating Committee ("the CC or the Committee") representing TID's banks and investors. The letter follows the Central Bank of Kuwait's ("CBK" or "Central Bank") report on TID's application under the Financial Stability Law "FSL", in which it reviewed and commented on a plan submitted by the Company on the 5 October 2010 and not the Supplemental Termsheet to the Original plan submitted to the CBK, via their advisers Ernst and Young, on 22 October 2010 and presented by the Company to its banks and investors on 1 and 2 November in Kuwait and Dubai respectively and put for voting by the CC

The CC considered that subsequent to this, any further negotiations over the restructuring should focus exclusively on a 'Debt for Equity' proposal, as per a draft proposal presented to TID by the CC on 20 September 2010. The structure of this proposal involved the equitisation of KD 475m, less than half TID's total debt commitments, for 90% of the TID's total shareholder equity.

The letter gave notice of the CC's resignation effective at the close of business 28 November 2010, unless a written commitment was received from the TID Board to immediately begin negotiations on an alternative 'Debt for Equity' proposal and to issue invitations to shareholders to attend an OGM/EGM to discuss a restructuring plan based on this principle.

The TID Board was surprised to learn that the confidential and sensitive contents of this letter had been leaked verbatim to the Kuwaiti media, on the same day as the letter was sent to the Company and prior to the TID Board being able to convene. It was clear that this was without any doubt a gross breach of the confidentiality arrangements agreed to by the CC by at least one of its members. In the opinion of the Board the passing of the letter to the newspapers was a cynical attempt to damage the prospects for progress towards a consensual solution.

There have been several previous breaches of confidentiality in the past, where sensitive material has been leaked (specifically to individual Kuwaiti newspapers) and which had led TID to give earlier warnings to the CC concerning their obligations concerning confidentiality. Nevertheless, the Board had the firm intention to explore the possibilities to continue the dialogue with all the members of the CC.

Since the CC's appointment on 15 June 2009, the Committee and the Company have worked closely and constructively, in conjunction with their advisers, to ensure a consensual restructuring plan was reached which prioritised TID's banks and investors, ensured TID's banks and investors were treated equally and maximised for all related parties. The Original Plan was prepared by the CC, accepted by TID and agreed by over 80% of TID's banks and investors and was submitted to the Kuwaiti Special Circuit Court on 9 March 2010 as part of TID's application to enter under the FSL.

Following the official notification of the CBK, and the subsequent appointment of Ernst and Young, to assess the viability of the Company's original plan under the FSL, there was a marked shift in cooperation and commitment from certain members of the Coordinating Committee. This became increasingly more apparent following a directive from the Central Bank to Ernst and Young to review the Company's original plan in the context of new regulatory ratio requirements released 3 months after the original plan was agreed, voted on and submitted to court.

Despite the directive being in violation of Law 74 of CBK's Regulations, the Company and its advisers worked closely with Ernst and Young, both in their review of the Original Plan and in the formulation of a supplementary termsheet to the Original Plan to ensure compliance with future regulatory ratio requirements. This was a complicated and lengthy exercise which took place over a number of months.

On 10 September 2010, the CC, led by some of its members, met with some members of TID Board to discuss a potential debt for equity plan. The proposed plan envisaged an exchange of 97% of shareholder equity for KD575 million TID's debt, equivalent to half TID's total outstanding commitments. This offer was subsequently amended to exchange 90% of TID's shareholder equity for KD475 million of existing debt, less than TID's total outstanding commitments. Under this proposal TID's shareholders would retain a combined 10% of the Company with outstanding commitments of KD600m.

It is clear that the purpose of this offer and the proposal outlined in the CC's letter to negotiate a 'Debt for Equity' plan on this basis is not aimed at reaching an agreement on debt settlement. The objective is to derail negotiations between the Company and its banks and investors, depriving the shareholders of their rights and to lay the foundations for the destruction of the Company's value. Despite the residual effects of the wider financial crisis, TID continues to maintain a strong and solid asset base and the Board views this proposal as an overt opportunist attempt by members of the CC to attempt to assume control of TID's assets, motivated by individual greed.

TID management informed the CC in September that is was unable to negotiate or recommend a proposal to shareholders that would lead to the erosion of 90% of shareholder capital and the decision to enter into negotiation could only be taken by shareholders at an OGM/EGM.

It is firm belief of the Board that for some time certain members of the CC, as evidenced above, have been acting on personal and destructive agendas which are not representative of the principles of their appointment or representative of the interests of TID's banks and investors. The CC has during this period distributed communications to TID's banks and investors which have at best omitted and at worst concealed relevant important and material facts. Most recently, the CC called off the voting process on the Supplemental Termsheet that the Company presented to its banks and investors on 1 and 2 November 2010 on the last day for voting; the results received at that time have not been shared with TID. This deprived the banks and investors of the opportunity of expressing their views directly in the process of restructuring on a plan that an accounting expert opined met with the CBK's new ratio requirements.

On the basis of the reasons outlined and in the best interest of all stakeholders, and in reiterating its full and unequivocal commitment to a consensual restructuring plan that is fair, acceptable and legally implementable TID's Board and management believe that it would be beneficial to accept the resignation of the current CC members offered in the Letter.

The Board will seek in due course to appoint a new Coordinating Committee and will in the interim communicate directly with banks and investors. 

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