Ithmaar to raise up to $500m for capital boost

Bahrain-based investment bank Ithmaar said yesterday it would raise between $400 million (Dh1.47 billion) and $500m through a mixture of a rights issue, a convertible sukuk and a credit call option to shore up its balance sheet.

"We are talking about $400m to $500m to increase the capital through these initiatives," Ithmaar Chairman Khalid Abdulla-Janahi told a news conference.

He said the Islamic lender plans to raise about $200m in a rights issue and about $200m by issuing a convertible sukuk. It has secured a five-year equity line of credit of up to $125m from Global Emerging Markets of New York (GEM). If Ithmaar draws the line, it will issue equity to GEM.

Several banks in Bahrain's conventional and Islamic off-shore banking centre have been trying to recapitalise themselves over the past months after their investments were hit by a regional property slump and slower economic growth.

Ithmaar has posted $88.39m in total losses over the past four quarters and also plans to turn itself into an Islamic retail bank by integrating its fully owned unit Shamil Bank.

Abdulla-Janahi said the Islamic lender was still focusing on strengthening its balance sheet.

"If we have operating losses, we can live with that. We always said 2009 would be the roughest year, but we want to prepare now for [opportunities in] 2010 and 2011," he said.

Mohamed Hussain, Chief Executive of Ithmaar, said the bank will issue a sukuk that is not structured around underlying assets, the first of its kind.

Sukuk are typically structured as profit-sharing or rental agreements around underlying assets to comply with the Islamic prerequisite of risks being shared between business partners.

"The investors will take a risk in the balance sheet, not in any underlying assets," he said.

 

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