Monday, Sep 14, 2009

By Dania Saadi

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Kuwait Projects Co (KPROJ.KW), the country's largest investment firm with ties to the ruling family, may tap the bond market to finance acquisitions and new projects, including a pension product and a private equity fund, a senior official told Zawya Dow Jones.

"We're combing the market and are always on the lookout for the right opportunity and the right price," Samer Khanachet, the company's chief operating officer said in an interview in Kuwait City. "There should be better opportunities now than there were two years ago, a better price and cheaper price for assets."

Kipco, which has about $19 billion in assets, bought in May a 42% stake in Jordan's Arab Orient Insurance and merged its pay-TV company Showtime, a joint venture with Viacom Inc (VIA), with Saudi Arabia's Orbit.

The company, which has launched a $2 billion European Medium Term Note program, could tap the bond market again to help finance acquisitions and other projects in the pipeline, Khanachet said.

"We're watching the market very carefully and now the market is opening up," said Khanachet, adding the company may seek to raise up to $500 million in new bonds from the program. "We certainly would like to extend the average maturity of our debt and to have resources available for opportunities."

Kipco has issued two tranches under the program, a $200 million bond in 2006, repaid last year, and $350 million bond, which is due in April 2011.

The company is planning to launch by the fourth quarter, or the first quarter of 2010 a pension and savings plan targeting the middle-income class in the Middle East and North Africa region.

"The potential size of the savings and pension market in the region is $5 billion and that's the incentive for us to enter this market and grab a market share," said Khanachet. "After five years we hope to have $1 billion of savings under our management which will be a consequence of selling these pension and savings products to clients in our region."

Kipco is also aiming to start by the fourth quarter of 2009, or the first quarter next year a private equity fund, which targets various sectors, including insurance and banking.

"We were thinking of a fund that would be as large as $1 billion," he said.

SEC

Kipco is forging ahead with projects even as three affiliated companies, Kipco Asset Management Co (KAMCO.KW), Bahrain-based United Gulf Bank (UGB.BH) and Al Raya Investment Co., are part of a probe by the U.S. Securities & Exchange Commission.

The SEC filed a lawsuit against Raya's chief executive officer, Hazem al-Braikan, who was found dead in July in Kuwait, accusing him and the three companies of involvement in an illicit profit from hoax trades in shares of U.S. companies, Harman International Industries (HAR) and Textron Inc (TXT).

Initially, a temporary court order was issued in the U.S. freezing the companies' assets, which has since been amended, according to a memo seen by Zawya Dow Jones.

"After the latest amendment to the SEC case, the only funds that are frozen with Kamco and UGB are the clients' proceeds from the trade in Harman stocks," Khanachet said. "No funds of UGB or Kamco are frozen. There is no impact whatsoever on Kamco's U.S. operations."

Kamco and UGB have denied gains from the transaction, saying they only acted as brokers for their clients. Raya has said it is cooperating with the U.S. authorities and that it had made no violations.

SAUDI EXPOSURE

Kipco's net profit dipped 56.5% in the second quarter to KWD12.4 million ($43.2 million) as the financial crisis hit its main units, including Burgan Bank, and the company increased provisions to cover exposure to bad loans.

Kuwait-based Burgan Bank has taken provisions to cover exposure to troubled companies, including Saudi private family conglomerates Saad Group and Ahmad Hamad Al Gosaibi and Brothers, which Standard & Poors has said owe about $10 billion to around 30 Gulf banks.

"Burgan has some and we have been conservative enough in our provisions that we are able to absorb it and deal with it," said Khanachet. "We're very comfortable with Burgan's position now and going forward."

Moody's downgraded in August Burgan Bank's rating by one notch, citing its exposure to Kuwait's troubled real-estate and investment firm sector, and recent regional high profile corporate defaults.

Kipco plans to stick to its forecast of doubling net profit in 2009 from KWD24 million a year earlier, he said.

Moody's affirmed Kipco's long-term and short terms issuer ratings earlier this month, but changed its outlook for the company to negative from stable, citing a deterioration in the credit quality of its units, mainly Burgan and UGB.

-By Dania Saadi, Dow Jones Newswires, +9714-364-4960; dania.saadi@dowjones.com Copyright (c) 2009 Dow Jones & Co.

(END) Dow Jones Newswires

14-09-09 0713GMT