Kuwait's Investment Dar creditor committee resigns following rejection of debt-for-equity plan

By Angela McDaniels

Tacoma, Wash., Dec. 8 - Investment Dar Co. KSCC said the coordinating committee representing its banks and investors and Investment Dar Bank's investor clients has resigned.

The company continues to pursue a restructuring plan and may appoint a new coordinating committee in due course, according to a company news release.

Investment Dar said the committee was pursuing a debt-for-equity exchange under which 475 million Kuwaiti dinars of existing debt would be exchanged for 90% of the company's shareholders equity, leaving 600 million dinars of debt outstanding.

This was not the original restructuring plan prepared by the committee, accepted by the company, agreed to by more than 80% of the company's banks and investors and submitted to the Kuwait Special Circuit Court on March 9, 2010 as part of the company's application under the Financial Stability Law, according to the news release.

The Central Bank of Kuwait told the company's adviser, Ernst & Young, to review the original plan in the context of new regulatory ratio requirements released three months after the original plan was submitted to court. The company said that since then, "there was a marked shift" in the cooperation of some members of the coordinating committee.

The company presented a supplemental term sheet to the original plan, which took into account the future regulatory requirements, to the committee in early November. Investment Dar said the committee called off the voting process on the term sheet and, in late November, warned that it would resign unless the company began negotiations about a debt-for-equity proposal and scheduled a meeting of shareholders to discuss the matter.

The company said it was not willing to negotiate a plan that would lead to the "erosion of 90% of shareholder capital" in exchange for the extinguishment of less than half of its debt.

The objective of the committee's proposal was "not aimed at reaching an agreement on debt settlement" but rather to "derail negotiations between the company and its banks and investors, depriving the shareholders of their rights, and to lay the foundations for the destruction of the company's value," Investment Dar said in the release.

The committee was appointed in June 2009.

Investment Dar is a Kuwait-based provider of Islamic Sharia-compliant investment activities and consumer finance services. Its subsidiaries include TID Global Sukuk I Ltd.

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