HSBC’s $400 million IFFCO exposure puts UAE restructuring talks in focus

Dubai: IFFCO Group, one of the Middle East’s largest consumer goods companies, has emerged as an unwelcome headache for HSBC Holdings Plc at a time when CEO Georges Elhedery is trying to make the British lender leaner, simpler and more disciplined with capital.

HSBC is IFFCO’s top creditor, according to people familiar with the matter, tying it to one of the region’s most closely-watched corporate restructuring situations. The bank has roughly $400 million of exposure to the UAE-based firm, one of the people said.

IFFCO, a maker of products ranging from cooking oils to biscuits and personal care brands, has been working for months to restructure about $2 billion in debt. A creditor group recently filed insolvency petitions after failing to reach an agreement.

It wasn’t immediately clear if HSBC has pared back its exposure in recent weeks, the people said, declining to be identified as the information is private. Dubai’s Emirates NBD Bank is another large creditor to the firm, though it has significantly reduced its exposure to over $100 million, some of the people said.

Representatives for HSBC and Emirates NBD declined to comment. IFFCO didn’t respond to requests for comment. 

The troubles at IFFCO come at a delicate moment for HSBC. 

While the financial hit from a single exposure of this size would likely be manageable given the bank’s balance sheet and earnings power, it comes a month after the bank’s quarterly profits were weighed down by an unexpected charge related to the collapse of UK mortgage lender Market Financial Solutions Ltd.

HSBC has also been looking to build an image of a tightly controlled institution focused on efficiency. The firm has been pushing through a sweeping overhaul aimed at reining in costs after years of sprawling expansion across dozens of markets. 

Elhedery, who took over Europe’s largest bank with a mandate to sharpen execution and boost profitability, has accelerated efforts to simplify reporting lines, pare back overlapping businesses and impose greater discipline on how the bank allocates capital.

While HSBC has repeatedly emphasised its focus on affluent customers, transaction banking and its historic strengths connecting Asia and the Middle East, large corporate exposures such as IFFCO highlight the risks that accompany those ambitions. 

Long-standing relationships with family-owned conglomerates have historically been a cornerstone of international bank franchises in the Gulf, generating lucrative business across lending, trade finance, cash management and capital markets. But if those clients stumble, they can quickly become a drain on management attention and earnings.

Founded in 1975, IFFCO operates the London Dairy ice cream brand and has a presence in about 50 countries. Its portfolio spans food, packaging, chemicals and logistics. The company traces its roots to India’s Allana Group, an agricultural commodities trader established in 1865. 

With multiple manufacturing facilities in the UAE and overseas that produce everything from cooking oils to animal feed, the privately held firm has emerged as a critical cog in the Gulf country’s food security apparatus.