Gulf Finance House (GFH) has had its credit ratings lowered by Standard & Poor's after failing to shore up its finances before a US$300 million (Dh1.1 billion) debt repayment next week. The ratings agency said it had lowered the Bahraini Islamic investment bank's long-term credit rating six notches, to "CC" from "B plus" and said it was under immediate and severe stress. The downgrade was the third in as many months and meant the stock retained its junk status with S&P.
"The downgrade and negative outlook reflect our view of GFH's very weak liquidity position because of the bank's inability so far to put into place measures to strengthen liquidity," said Goeksenin Karagoez, a credit analyst at S&P. GFH has been trying to raise cash to refinance a $300m syndicated loan due on February 10. The bank confirmed it was in discussions with WestLB about the terms of the syndicated facility. It is also believed to have approached private investors in recent days to raise loans, pledging property and other assets as collateral.
Many Bahraini offshore investment houses have been hard hit by the financial crisis, which sent property prices tumbling. GFH had invested heavily in Dubai's property market, including the vast Dubailand development. It said last December it would reduce its liabilities by about $290m after exiting its investment in the Arabian Legends Theme Park, for which it joined a consortium of architecture and construction firms in 2004. The bank has been trying to shore up its balance sheet, which has been hit heavily by the financial crisis. It also tried to raise cash by selling off "non-core assets".
Bahrain's bourse suspended GFH's shares as it awaited more information from the firm, while on the Kuwaiti bourse, where trade continued, its shares fell 4.7 per cent yesterday. "We understand that GFH is still in discussions with third parties on the sale of some of its investments, but the conclusion of these transactions is proving to be more time-consuming than management had anticipated," S&P said.
The ratings agency said it would reverse its decision if GFH found alternative sources of financing. But S&P said it was necessary for the bank to restructure its financing to more longer-term sources. @Email:firstname.lastname@example.org