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Saudi Banks Reject Algosaibi Meeting on $5.9 Billion Default

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Saudi Banks Reject Algosaibi Meeting
Algosaibi and billionaire Maan al-Sanea’s Saad Group missed payments on at least $15.7 billion of debt in 2009 in the Middle East’s biggest default, as the global financial crisis froze credit markets and asset prices slumped. Photographer: Waseem Obaidi/Bloomberg

A group of Saudi Arabian lenders has rejected an invitation from Ahmad Hamad Algosaibi & Brothers Co. to attend a meeting next month to discuss their claims on $5.9 billion of debt.

“The banks have no interest in attending the meeting proposed,” according to a letter to Algosaibi from a law firm representing the unnamed Saudi lenders and seen by Bloomberg News. The letter, dated April 3, didn’t give a reason why the banks don’t want to attend.

Algosaibi and billionaire Maan al-Sanea’s Saad Group missed payments on at least $15.7 billion of debt in 2009 in the Middle East’s biggest default, as the global financial crisis froze credit markets and asset prices slumped. The two family holding companies, which are related by marital ties, have been locked in legal disputes ever since.

More than 70 local, regional and international creditors received letters from Algosaibi last month inviting them to a meeting on May 7 in Dubai. The company, which operates in industries from construction to finance, plans to propose a comprehensive settlement on about 22 billion riyals ($5.9 billion) of claims from lenders for unpaid loans, according to Algosaibi estimates.

’Full payment’

Saudi banks “expect immediate and full payment of all their claims against AHAB, and reserve all their rights to take all appropriate actions to enforce against such claims,” they said in the April 3 letter. Banks rejected Algosaibi’s original debt restructuring proposal four years ago.

Units of Algosaibi and Saad borrowed from more than 80 regional and international banks to finance expansion into real estate and investments in the kingdom and regionally. One-third of the debt is owed to Saudi banks including Al-Rajhi Bank and National Commercial Bank, a third to other Middle Eastern lenders and the rest to global banks, Simon Charlton, Algosaibi’s chief restructuring officer, said in an interview in Dubai on March 25.

Mohammed Al Yami, a spokesman for Al-Rajhi, and an official from NCB, who asked not to be named due to company policy, declined to comment when contacted by Bloomberg News yesterday.

Revised Deal

Terms of the revised deal to be offered to banks in May are likely to be less favorable than those rejected by lenders in December 2009 because the value of the company’s operating assets has fallen, Charlton said March 25.

The company’s 2009 offer to banks included a pledge of 3 billion riyals in securities and a further 3 billion riyals in securities, property and cash over five years based on assets worth about 10 billion riyals, according to documents filed in a Cayman Islands court in November 2010 and shown by Charlton to Bloomberg News.

Algosaibi’s restructuring attempt comes amid a recovery in the Saudi banking industry, which is benefiting from government plans to invest more than $500 billion developing infrastructure and industry to boost job creation. Economic growth in the Kingdom is forecast to be 4.4 percent in 2014, up from 3.6 percent last year, according to data compiled by Bloomberg.

‘Comprehensive Proposal’

Algosaibi “will continue to work toward a comprehensive proposal and settlement and hopes to persuade the Saudi banks directly, and through the Saudi legal system, that they should join this process,” Charlton said by phone yesterday. “Saudi tribunals have accepted international claims that pre-date the Saudi banks’ claims, so it is AHAB’s understanding that the Saudi authorities are unlikely to endorse a settlement that is not a global settlement.”

Charlton, former head of Deloitte LLP’s forensic services in the Middle East, joined Algosaibi last June to help the company restructure its operations, along with Ben Jones, also from Deloitte, who was hired as chief financial officer.

Algosaibi “and its advisers have and continue to receive positive responses from a number of banks that are very interested in reaching a resolution,” Charlton said yesterday. “After nearly five years, most financial institutions realize a comprehensive settlement is in the best interest of everyone involved.”

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