Mumtalakat will back Gulf Air says CEO
Manama, July 21, 2011
Bahrain sovereign wealth fund Mumtalakat will continue to financially support Gulf Air even though the loss-making carrier will be a drag on its 2011 earnings, the fund's chief executive said.
Mumtalakat, which bundles Bahrain's non-oil state-owned companies, is one of the smaller sovereign wealth funds in the world's top oil-exporting region, with $9.1 billion in assets at the end of 2009. It owns stakes in several state firms such as Gulf Air and Aluminium Bahrain.
"Gulf Air is a challenging asset for us," Talal Al Zain said in a telephone interview from London on Wednesday. The firm made profit of 26.15 million dinars ($69.38 million) in the first half of 2010, according to its website.
Its 2009 net loss was $487.2 million, largely attributed to losses in Gulf Air and Aluminium Bahrain.
"Our results are looking good but what drags us down is Gulf Air," Al Zain said.
Mumtalakat said last year that it would look to offload the ailing airline to the government. "We hope there will be a turnaround in Gulf Air soon, after they launched a new strategy. We will continue financially supporting it for now," said Zain.
Gulf Air, which competes with the likes of Dubai's Emirates and Qatar Airways, recently implemented a strategy to find a niche by building a network of regional routes to destinations it sees as under-served.
Mumtalakat was removed from CreditWatch negative by rating agency Standard & Poor's on Wednesday, which cited diminished near-term political tensions and expectation that increased public spending will lift economic growth next year.
Bahrain was handed a $10 billion stimulus package by its wealthier Gulf neighbours, which it plans to use for infrastructure and housing to quell unrest that erupted in March and resulted in the government declaring martial law. That was lifted at the start of June.
"We are 100 percent tied to the government of Bahrain and will always have support from them," said Zain when asked if Mumtalakat will get any of the $10 billion stimulus.
Zain said the fund is open to selling some of its local private equity holdings to diversify into more liquid and international assets.
Last year, the fund raised $338 million by selling 10 percent of its stake in Aluminium Bahrain through an initial public offering. It had planned to raise up to $540 million but the IPO was priced at the bottom of the range.
"We are an investment company and we are always open to these (IPO) options. We are looking for opportunities," the CEO said. However, he did not say whether any assets are up for sale at the moment. - Reuters