Kuwait's Dar considering state rescue facility

Kuwait State Rescue Facility

Kuwait's Investment Dar, a Kuwaiti finance house that owns half of British car-maker Aston Martin, is set to use an untested "financial stability law" to protect itself from creditors who have declined to back its debt restructuring.

Along with creditors it is considering the use of a US$5.2 billion state rescue facility.

The Islamic investment group have said in a statement that the Kuwaiti government's aid fund would provide the legal framework for the restructuring process amid the current hostility surrounding the creditors and investors who have opposed its restructuring plan.

"Dar would not seek financial support in making its repayments, but a legal framework to implement its well supported plan," Adnan Al Musallam, Investment Dar's chairman and chief executive said.

Filing for legal protection

The Kuwaiti investment company hopes that, by filing for legal protection under Kuwait's financial stability law, it would compel the remaining creditors to agree to the plan. It would be the first time the law has been invoked since it was passed last year,a s reported by the Financial Times.

"Entry into the ... law will enable Investment Dar to implement the agreed restructuring plan by binding the small minority of dissenting investors," said Alm Musallam.

The world's fourth largest oil exporter approved the rescue package last year, which guarantees 50 percent of fresh loans banks provide to local firms as part of a plan to soften the impact of the global credit crunch.

Helping stressed lenders

The main objective of the financial stability law was to help stressed commercial lenders in Kuwait, but it also covers the vast number of Kuwaiti investment companies. This means that under the law Investment Dar are protected from "all judicial proceedings ... until the competent court circuit reaches a decision".

However, the law also states that an parties involved may file a case against the motion within 15 days of it being forwarded. Furthermore, running disputes over the level of the Gulf state's impaired investment provisions for 2008 has meant the Kuwait central bank has yet to approve the company's 2008 and 2009 financial statements. Until this is resolved the restructuring is unlikely to happen.

In September, Kuwait's central bank appointed a temporary supervisor to monitor debt restructuring and the compilation of financial results at Dar. According to Reuters, Dar had said it was seeking to borrow up to $1 billion to refinance its debt.

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Daniel Jones

Daniel is a Politics and Philosophy graduate from Cardiff University where he also worked as a section editor on the award winning student newspaper. After university he joined an IT support company where he was a B2B online writer. He loves anything to do with sport and joined GDS in July 2009.

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