Word: bahrain
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...just a year after the bank was launched and when Kirdar and his colleagues were doing business from rented space in a Holiday Inn in Bahrain, he boasted that he was putting together a bank "like something J.P. Morgan envisaged." Thanks to Kirdar's connections, Investcorp was able to raise $50 million in start-up capital and four years later another $50 million. Investcorp's list of founding shareholders reads like a Who's Who of the gulf, including the names of dozens of leading businessmen and members of the region's ruling families, among them Sheik Ahmed Zaki Yamani...
...bank has reported healthy profits year after year. (In 1994 it posted a net profit of $51 million, down from record earnings of $67.3 million in 1993.) Its stock, listed on the Bahrain Stock Exchange, has quadrupled in price since the bank's founding. But for Investcorp clients who participate in takeovers arranged by the bank, it has not always been smooth sailing. Many deals have been duds. Dellwood Foods, a troubled New York dairy acquired in 1985, languishes unsold in Investcorp's portfolio. Also unsold is Chaumet, a world-famous French jeweler, which has racked up millions of dollars...
...Investcorp managed to raise billions of dollars when its track record is so uneven? Its sales force is based in Bahrain, about an hour's flight from most of the bank's clients. Scores of Arabic-speaking marketers travel throughout the region, offering deals and updates on past transactions. It's a level of "expensive, personalized service," says Kirdar, that Investcorp's competitors can't match. Investcorp's success in the Middle East may also be due to its marketing documents, which are not overseen by Western regulatory agencies. The contrast is striking between an Investcorp private-placement memorandum...
...which cost depositors billions of dollars. Much of the blame was placed on regulators who seemed oblivious to B.C.C.I.'s frauds. No one is suggesting that this is another B.C.C.I. case in the making. When questioned about Investcorp's practices, its officials noted that the bank is licensed in Bahrain and is well supervised. "It's a very strong regulatory agency," says Kessler...
...questions remain. Investcorp has thrived in the Bahraini environment, perhaps because some of the most powerful businessmen in the tiny island state are directors and major shareholders. When the bank was founded, it was granted an extraordinary privilege by the Bahrain government. At the time, foreigners were barred from buying stock in publicly traded companies unless they were citizens of Bahrain or of one of five neighboring countries in the Gulf Cooperation Council. The Bahrain authorities allowed Investcorp to sell 25.8% of its stock to a company owned entirely by citizens of Iraq (a non-gcc country), including Kirdar. Another...