The Investment Dar (TID), the struggling Kuwaiti company that owns half of the British car maker Aston Martin, has started legal action to enforce a US$3.5 billion (Dh12.85bn) debt restructuring agreement on a minority of creditors who have not approved it. "Investment Dar announces today that it has started a process of legal protection under the terms of Kuwait's Financial Stability Law," the company said yesterday.
TID said last month it had secured the assent of 80 per cent of its creditors on a debt restructuring, but a final pact has been delayed because some of the banks to which it owes money have not accepted it. Commercial Bank of Kuwait is the largest of the banks holding out, said a source close to the company. The stalemate led TID to seek help from the Financial Stability Law, a bill passed last year to help Kuwaiti investment companies and banks weather the downturn. Its provisions, which allow companies to receive government assistance in negotiating debt restructurings, had not been used until TID's filing.
The law is one of several measures that the Kuwaiti government has enacted recently to help stabilise markets and return the financial system to health. However, many analysts and investors believe that while TID and Global Investment House - a company that finalised a $1.7bn debt restructuring last year - are on the way towards a recovery, some companies in the country will not be able to adapt to changes brought on by the economic downturn.
Kuwait's parliament also recently passed a bill to establish an independent Capital Markets Authority (CMA) to police the local exchange, a job previously handled by a combination of government agencies and the stock exchange itself. The bill, which has been under consideration in different forms for at least six years, now awaits an expected final approval from the government. Many observers and investors in Kuwait expect the new CMA, if it is a strong regulator, to help end a long history of insider trading and speculation, and to rid the system of small, thinly traded companies that account for a large number of the market's 220 listed entities.
Some commentators have cast the CMA as a possible catalyst for a surge on Kuwait's stock market, which is driven mainly by small-time traders and lacks a strong institutional component backed by large pools of capital. "I'm beginning to get really excited about it in Kuwait," said MR Raghu, the senior vice president of research at Markaz, a Kuwaiti investment company. "Right now nobody is seeing the positive side of this. They're neutral, but you should be celebrating actually, because this is a stock exchange that is getting the breather of an independent regulator."