The office announced in Madrid yesterday that its Spanish holding company, Grupo Torras SA, would suspend payments in its Spanish investments and apply for receivership after discovering that the group's financial problems were 'much worse than the most pessimistic hypothesis'.
The move was not entirely unexpected but defied almost daily calls recently from Spain's economy minister, Carlos Solchaga, for the office to 'live up to Kuwait's obligations'.
Mr Solchaga recently told foreign correspondents in Madrid: 'They (the Kuwaitis) took a gamble, did well for a while and are now taking a loss. That's the way the cookie crumbles.'
He failed to mention that the Spanish government had done much to encourage the KIO's investments.
The KIO, the official investment branch of the Kuwaiti state, had claimed financial restrictions caused by the Iraqi invasion, coupled with corruption within previous administrations at Grupo Torras, made continuing investment in the group's holdings - in other words subsidising its losses - impossible.
But most financiers here saw yesterday's move as a blow to the worldwide credibility of the KIO, which also has massive investments in Britain.
At a dramatic press conference in Madrid to announce Torras's suspension of payments, Mahmoud al-Nouri, KIO deputy chairman, cited the need 'to protect all concerned, the creditor, employees and shareholders'. But government sources said the move was likely to put at least 30,000 Spanish workers under the Torras umbrella out of work.
Mr Nouri said the KIO had lost about dollars 4.5bn worth of investments in Spain in the past few years, including dollars 2bn on the stock market alone to sustain the group's value, and a further dollars 700m in other short-term financing operations overseas.Reuse content