Gulf Finance House in talks on $100m convertible

Bahrain-based Gulf Finance House (GFH) is in advanced talks with banks to place a $100 million convertible Islamic instrument and plans to launch a new bank in the region, its chief executive said on Tuesday. "We're in advanced conversations with more than one party," Ahmed Fahour told Reuters.

"They are in all cases large financial institutions, bigger than Macquarie," he said.

GFH has placed the $100 million murabaha convertible, a financing tool compliant with Islamic law, with Australia's Macquarie Group and is in talks with the bank to create a joint-venture in investment banking.

GFH is trying to reinvent itself by turning into a full-blown commercial bank from an investment house focussing on real estate, after posting three consecutive quarters of losses.

Bahrain's largest listed Islamic investment bank plans to reduce its exposures to real estate, which accounts for about half its assets, and build up revenues in investment management, investment and commercial banking.

Fahour said GFH was also in the process of launching a new bank.

"We're hoping to launch in the fourth quarter, subject to approval, in one of the countries in the Middle East," he said, declining to provide details.

He declined to say whether GFH planned to raise its 37 per cent stake in Khaleeji Commercial Bank, which it has said will be at the core of its commercial banking operations. GFH's Chairman Esam Janahi owns an additional 10 per cent in the bank.

GFH will try to roll over a $300m murabaha loan facility that matures in February 2010, Fahour said.

"We would like to roll over some if not all of that commercial debt facility", he said, adding the bank was currently putting together a proposal to be presented to banks by year-end.

GFH had approached banks in July to refinance the facility but then delayed it until after a capital increase through which it raised over $300m last month to repair its balance sheet.

Several of Bahrain's investment houses have been recapitalising themselves over the past months and are trying to diversify their income by branching into investment or retail banking.