Kuwait's biggest investment bank on Thursday said it had defaulted on the majority of its debt while Bahrain's two biggest commercial banks saw their ratings outlook downgraded, as the global financial meltdown pummeled an oil-rich Gulf Arab region that months ago was the focus of a much-hyped economic boom. Further reflecting the troubles facing the region, Standard Chartered Bank on Thursday sharply revised down its outlook for economic growth in the region, citing the current global meltdown. The announcement by Kuwait's Global Investment House marked a sharp blow for the firm, which had been meeting with creditors about restructuring what its managing director said in December was $3 billion in loans. That push came after Global defaulted on a $200 million dollar maturing loan that month, prompting Fitch Ratings to downgrades its ratings. In its latest statement, the company said “in default on the majority of its financial indebtedness.” Global had retained CBK Capital and HSBC Holdings as financial advisers, and Kuwait's Central Bank had also been working on securing a $1 billion loan for the firm,which manages about $10 billion in assets. The news was another reminder of the mounting difficulties confronting some companies in the Gulf Arab nations - a region which analysts have said was expected to weather the worst of the global downturn largely because of an oil price bonanza in the first half of 2007. Moody's Investors Service on Thursday lowered to negative from stable the outlook on the A2 long-term foreign currency deposit ratings of Bahrain's two largest retail banks. The revision affecting the National Bank of Bahrain B.S.C. and BBK B.S.C. came just two days after it revised down its outlook to negative on Bahrain's sovereign rating. Moody's said the step follows the lowering in the outlook to negative on Bahrain's A2 foreign currency deposit ceiling. Both banks “have foreign currency deposit ratings situated at the A2 ceiling for such ratings in Bahrain, and this ceiling constrains the ratings of both the banks,” George Chrysaphinis, a Limassol, Cyprus-based Moody's vice president and senior analyst said in a statement. Analysts have repeatedly argued that unlike their Western counterparts, banks in the Middle East had significantly less exposure to the so-called toxic debt that fueled the current global financial crisis. That has left them in a better overall situation. Even so, as international credit markets have dried up and liquidity has been strained in the domestic Gulf markets as foreign investors pull out. That has prompted the various governments to take a range of steps to bolster confidence, including direct cash injections, guaranteeing deposits and slashing key interest rates. The UAE Central Bank, for example, said Wednesday it had provided $1 billion in a dirham-dollar swap facility to banks as a way to lower interbank lending rates, analysts said. Warnings have sounded repeatedly about Kuwait's banking sector, with Moody's last month cautioning that the country's banks could face difficulties because of their exposure to the commercial real estate sector. Kuwait's Central Bank governor, Sheik Salem Abdul-Aziz Al Sabah earlier this week said he would not be surprised if some of the investment firms went bankrupt. While he did not name any firms, he said such investment companies should “consider mergers, because mergers are a good way out” for them.
