Global back in business

Regardless of the causes that led one of the leading investment companies in the middle east to default on $1.7 billion debt, they have achieved a number of milestones in a challenging environment to prevent bankruptcy. During the past weekend Global signed a formal restructuring agreements with 53 local and foreign banks putting an end to defaults. Today Kuwait Stock Exchange reacted handsomely to the news.

Now what's next?

According to Global, the management will focus on their core business in brokerage, investment banking and asset management. Though, the income generated from this area can barely cover the cost of finance, they will end up liquidating their investments to repay the loans. Whether or not they can liquidate at favorable levels? only time will tell.

The key terms of the restructuring plan (as mentioned in their press release):

• New multi-currency conventional, Islamic and bilateral facilities totaling USD 1.73bn which will be utilized to discharge the existing facilities and are largely based on the terms of Global's existing syndicated facilities.

• The facilities will be amortized over three years primarily using the proceeds from the sell down of assets in the Global Macro Fund.

• Initial facility pricing of a relevant benchmark plus 150 bps stepping up by 1% each year.

• Repayments of debt will be applied on a pro rata basis against the debt owed to Global's creditors (including the bondholders) who will share in the proceeds of such repayments and any enforcement on the terms set out in an intercreditor agreement.

• The obligations under the new facilities will be secured by Global (or its relevant subsidiaries) granting security over the units in the Global Macro Fund, shares in Real Estate Holdco and certain of its subsidiaries, property held directly/indirectly by Real Estate Holdco and accounts holding the proceeds from the realization of assets in the Global Macro Fund (and certain of Global's other income streams), in each case, in favour of the financiers (including the bondholders) on a pari passu basis.

• Other than the grant of security referred to above, the terms of the three bond issues of KD115 million (USD0.40bn) by Global remain unchanged.

Tourism industry in Dubai

Away from the western media frenzy on news that Dubai World was looking for a standstill agreement on $59 billion of debt, I went through interesting facts about the tourism industry in Dubai:

• Tourist arrivals to Dubai were 3.85 million visitors through the first half of 2009 up 5%. In contrast, 10 years ago Dubai had about 3 million visitors annually; 20 years ago, it was around 600,000 visitors.
  
• Total number of guests stayed at hotels is up so far this year, but average occupancy dropped to less than 70% from the more than 87% experienced between January and June last year, due to new supply of hotel rooms.
  
• Dubai had 58,000 hotel rooms at the end of the first half of 2009, with an increase of 17% over last year. Thousands more are due to enter the market in the next few years (Las Vegas has just over double the number of rooms with five times the number of visitors annually!!).