SHAREHOLDERS SIGNAL SUPPORT FOR GFH GROWTH STRATEGY

 

  • GFH announces the approval of its shareholders on the Agenda of 14 November OGM and EGM which included:
    • to raise up to $500m through a convertible murabaha to strengthen capital base and fund growth strategy.
    • for 4:1 share consolidation and other capital reduction measures
    • to approve the acquisition by GFH of another 10% of Khaleeji Commcerial bank.

 

  • Shareholders agreed to form a consultative committee of some key shareholders and Board Members to provide input into GFH’s proposed capital management plans

Manama, Kingdom of Bahrain- Gulf Finance House BSC (”GFH” or the “Bank”), the Bahrain based Islamic investment bank, announced that shareholders have voted to support the bank in its plans to improve the Bank’s capital structure, strengthen its balance sheet and raise funds to pursue its growth strategy.  This follows the Ordinary and Extraordinary Meetings of the Bank, held on 14 November, at which resolutions were approved by GFH shareholders with a number of shareholders objecting to the process and their concerns were noted by the Board. A  committee of shareholders to assist in the implementation of the Banks plans was also formed in order to review and support the proposed recapitalisation plan.

Thanking shareholders for their support Mr. Esam Yousif Janahi, Executive Chairman of GFH said:

“I would like to offer my sincerest thanks to our shareholders for their firm and steadfast commitment to our plans and to our new initiatives for growth.  We understand very clearly the challenges that we face and I know that our shareholders appreciate those challenges too. The Board and I firmly believe that the measures we will now implement will help us not only overcome these challenges but emerge as a stronger, better funded and more robust institution.

I value greatly the candid advice and input from our shareholders at the meeting and would like to assure them that it will be taken into consideration going forward. I look forward to working with them now in the months ahead as we continue the process of restructuring, recapitalising and refocusing GFH. I have personally invested in this process and would like to encourage our shareholders to do so.

Mr Janahi added: ” The capital that we will raise from our convertible murabaha will enable us to take these steps and move forward with plans to recapitalise the Bank, fund acquisitions and provide initial seed capital for investments.  This will take time but we believe that, with the continuing support of our shareholders, our plans will ultimately place GFH at the forefront of the Islamic financial services market: a market that is over US$1 trillion in size and growing at 20% per year.”

GFH - Strategy for Growth

The realigned GFH growth strategy will see a stronger focus on the creation, development and management of Islamic financial institutions offering a range of financial products and services to corporate and retail clients, enabling a more stable business model of recurring revenues.

Over the past decade, the GFH team and the Bank’s shareholders have together created Islamic financial institutions across the MENA, GCC and Asia regions with paid up capital of approximately US$2.5billion, including institutions such as First Energy Bank, Khaleeji Commercial Bank and QInvest.  It is intended that the bulk of future revenue will be based on management fees, transaction fees from advisory income and dividends/capital growth from seed investments and performance fees.  GFH will target its new strategy in regions and countries such as: Saudi Arabia and the GCC, Turkey, the Levant region, Africa, Central Asia, India and Malta, with an opportunistic approach to other markets.

Management Explanation of Measures Approved by Shareholders

1.     Shareholders have approved the Bank’s intention to raise up to $500 million by way of a convertible murabaha to fund GFH’s new growth strategy. The convertible murabaha will have a tenor of 3.5 years and will be structured to offer investors potentially significant rates of return.  The proposed conversion price will be in the range of US$0.31 to US$0.40 cents, representing a discount to the theoretical market value post consolidation of between 20-40%, with the exact price to be determined by the Board of Directors at or shortly before the date of drawdown.  In addition to the discounted conversion price, investors will benefit from payment of the first year’s profit payment in cash and early in-kind profit payment in GFH shares to the value of 2.5 years’ profit rate at the conversion price, if conversion occurs before 31 December 2010.  The capital raising will be open to current and new shareholders alike.

2.     Shareholders have also approved the recommendation made by the Bank to a consolidate and reverse share split of the issued shares of GFH at a ratio of 4:1 be carried out.  This will result in the issued shares being reduced from 1,896,332,565 shares to 474,083,141 shares and reduce the paid up capital of GFH to US$145,780,565.93 to eliminate accumulated losses.

The rationale for implementing the share consolidation and the capital reduction is to align the par value of GFH shares to the current market price.  In accordance to the Bahraini Law, new shares can’t be issued at a value lower than par value. However, our existing par value is too high (US$0.33) compared to current market value of our shares (C. U$$0.125) to be considered attractive. The consolidation and reverse share split of the issued shares and the reduction of the paid up capital are aimed to reduce the par value and allow the placement of the new convertible murabaha to be performed at a competitive conversion price, maximising probabilities of success of raising the liquidity needed to implement our strategy.

The share consolidation and capital reduction will not alter the underlying value or market capitalisation of the Bank and shareholders will continue to hold the same levels of ownership.

3.     Shareholders have also approved, as part of the capital raising, the transfer by Mr. Esam Janahi, Executive Chairman of GFH, of his entire approximately 10% holding in Khaleeji Commercial Bank B.S.C. to GFH in return for GFH’s 100% equity interest in Al Areen Leisure and Tourism S.P.C. in addition to US$3 million to be paid through GFH Treasury Shares.  This takes GFH’s shareholding in Khaleeji up to 47%.

- Ends -

About Gulf Finance House

Since its establishment in 1999, Bahrain based Gulf Finance House (GFH) has been a driving force in the development of regional Islamic financial institutions and infrastructure projects across the Middle East.  Its shares are listed on the Kuwait Stock Exchange, the Bahraini Stock Exchange, the Dubai Financial Market and the London Stock Exchange in the form of a GDR.  It has been responsible for the creation of leading Middle Eastern financial institutions such as First Energy Bank, QInvest, Syria Finance House, Inovest, Khaleeji Commercial Bank and Arab Finance House.  In addition, GFH has created a wide range of significant economic infrastructure projects across the MENA region and beyond.

GFH is currently transitioning to a new business model which will see the business focus on becoming a global leader in the creation and development of Islamic financial institutions.

 

For further information please contact:

Amal Turki

Head of Corporate Communications

Tel: +973 17538538

Email:

Website: www.gfh.com