VZCZCXRO2184
PP RUEHDE RUEHDH RUEHDIR
DE RUEHKU #0599 1691314
ZNR UUUUU ZZH
P 181314Z JUN 09
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 3491
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS KUWAIT 000599 
 
SIPDIS 
 
STATE FOR NEA/ARP, EEB/IFD/OMA, EEB/EPPD 
STATE PASS FEDERAL RESERVE 
TREASURY FOR INTERNATIONAL AFFAIRS 
 
E.O. 12958: N/A 
TAGS: EFIN EINV ECON KU
SUBJECT: KUWAIT'S GLOBAL INVESTMENT HOUSE RECAPITALIZES 
 
REF: KUWAIT 8 
 
SENSITIVE BUT UNCLASSIFIED -- HANDLE ACCORDINGLY 
 
¶1. (SBU) Summary: Kuwait's largest investment firm, Global 
Investment House -- which faces almost $3 billion in short- 
and mid-term liabilities -- announced plans June 15 to raise 
approximately $523 million in a capital subscription. 
Additionally, the company hopes to raise a further $730 
million by selling off 30% of its proprietary assets.  The 
proceeds of these offerings will be used to repay a portion 
of GIH's outstanding debt.  GIH's CEO lamented the GOK's 
failure to prop up the country's troubled investment sector. 
End Summary. 
 
¶2. (SBU) GIH announced a $523 million recapitalization at its 
June 15 annual shareholders meeting.  The announcement came a 
week after the firm held two meetings with representatives of 
53 banks involved in syndicated loans to the firm, at which 
the creditors agreed to extend standstill agreements put in 
place in January 2009, following the firm's December 2008 
default (ref A).  GIH CEO Bader Al-Sumait told Econoffs June 
16 that the firm will also sell 30% of its proprietary assets 
-- which were placed in a Macro Fund and conservatively 
valued at $2.4 billion by PricewaterhouseCoopers -- with the 
goal of raising approximately $730 million.  Noting the 
firm's ten-year track record, $7.4 billion under management, 
presence in 14 countries, and positive shareholders' equity 
of $1 billion, Al-Sumait voiced optimism that existing 
shareholders and new investors will participate in both 
offerings. 
 
CEO LAMENTS GOK INACTION 
------------------------ 
 
¶2. (SBU) During the meeting with Econoffs, Al-Sumait lamented 
the GOK's failure to support Kuwait's troubled investment 
sector, attributing the problem above all to the Government's 
perennial inability to articulate policy proposals and to 
stand up to obstructionist parliamentarians.  He said the 
lack of GOK support in the investment sector stood in stark 
contrast to interventionist policies pursued by Governments 
in the U.S. and elsewhere in the past year.  He also asserted 
that none of Kuwait's investment companies would apply for 
relief under the GOK's $5 billion financial stability law, 
given the terms and fundamental weaknesses in the law's 
provisos (septel). 
 
¶3. (SBU) Comment: Six months after GIH's $200 million default 
(ref A), the firm appears to have assuaged its creditors -- 
and assured its core shareholders -- of its long-term 
financial viability.  Kuwait's banks' unwillingness to lend 
money in the current economic environment is clearly 
hampering GIH's ability to raise new debt, contributing to 
the firm's decision to rely on the $523 million capital hike 
and sale of 30% of its core assets to enhance liquidity.  End 
Comment. 
 
********************************************* ********* 
For more reporting from Embassy Kuwait, visit: 
visit Kuwait's Classified Website at: 
 
http://www.intelink.sgov.gov/wiki/Portal:Kuwa it 
********************************************* ********* 
JONES