The Central Bank of Bahrain said a local court ruled in its favor, rejecting an appeal against placing Awal Bank BSC under administration after it defaulted on loans.
The court ruled on an appeal by Awal Bank’s former Chairman Maan al-Sanea against the decision made by the central bank in July last year, the bank said in an e-mailed statement today.
“The ruling today clearly validates our decision and we will continue to support the independent administrators,” said Khalid Hamad, executive director of banking supervision at the central bank in the statement. “Their priority is the realization of Awal Bank’s assets, for the benefit of all stakeholders and creditors, through all available means.”
Bahrain’s central bank seized control of Awal Bank and The International Banking Corporation BSC in July after they defaulted on loan payments. A central bank report showed that debts at the two lenders, Bahraini units of Saudi Arabia’s Saad and Algosaibi groups respectively, exceeded their assets.
U.K.-based law firm Charles Russell LLP, Awal’s external administrator, together with Baker Tilly Restructuring and Recovery LLP, have worked with the central bank to recover money owed and have initiated legal proceedings across a number of jurisdictions, including Bahrain, London, New York, the Kingdom of Saudi Arabia and the Cayman Islands, the central bank said.
Awal also filed for bankruptcy in a U.S. court in September and listed more than $1 billion in assets and debt in its Chapter 15 petition. Under Bahrain law, Awal’s administrator has two years to decide if the bank should liquidate or be returned to management and shareholders, said lawyers from the bank’s U.S.-based counsel, Quinn Emanuel Urquhart Oliver & Hedges LLP.
Awal’s assets were about $5.5 billion against debt of $2.75 billion as of July 31, 2009, according to an unaudited balance sheet cited by the company in court documents in the U.S.
The Manama-based investment bank mostly lends to other banks in the Middle East and Europe. Its three shareholders are al-Sanea and two entities he owns, Saad Investments Co., which is liquidating in the Cayman Islands, and Saudi Arabia-based Saad Trading, Contracting & Financial Services Co., according to court documents.