Ahmad Hamad Algosaibi & Brothers Co. reached a deal with leading creditors to settle $5.9 billion of debt, taking the Saudi Arabian company closer to resolving a six-year impasse after the biggest default in the Middle East.
Algosaibi and a steering committee of five lenders agreed on a more favourable proposal for banks than one the holding company made last May, Algosaibi said in an e-mailed statement Tuesday, without giving any details on the revised agreement.
“We’ve moved our position significantly and, without question, this deal represents the best option for financial institutions seeking recoveries,” Simon Charlton, Algosaibi’s acting chief executive officer, said in the statement. “Upon receiving support from the wider claimant group, we will seek ratification of the settlement in the kingdom.”
Algosaibi and billionaire Maan al-Sanea’s Saad Group defaulted on at least $15.7 billion as the global economic crisis froze credit markets and asset prices slumped. The two family holding companies, related by marital ties, have been locked in legal disputes ever since. Algosaibi’s interests range from construction to the shipping industry.
Other Persian Gulf companies that were caught in the global financial crisis also restructured debt. Dubai World, which roiled global markets in 2009 with a plan to freeze debt payments, agreed a new deal with creditors in February, altering the terms of an original agreement made in March 2011. It paid $2.92 billion to creditors in March as part of the accord, people with knowledge of the matter said this week.
New Settlement Terms
Algosaibi last May offered to guarantee banks at least a 20 percent payment on each dollar of its debt and an additional 30 cents depending on asset recovery and litigation, according to a presentation made to creditors at the time.
The company will present the new settlement terms to remaining creditors at a meeting that will be scheduled within weeks, Algosaibi said. A total of 90 banks out of 109 identified claimants, representing 60 percent of the company’s total debt, are formally involved in the settlement process or have written to Algosaibi to say they will participate, the company said in the statement.
The steering committee is made up of Standard Chartered Plc, Emirates NBD PJSC, BNP Paribas SA, Arab Banking Corp. and Fortress Investment Group LLC. Saudi Arabian banks have refused to take part in the talks. Some have seized Algosaibi assets, while others are taking legal action to try and recover debt.
Units of Algosaibi and Saad borrowed from lenders to finance investment and expansion into real estate. One-third of the debt is owed to Saudi Arabian banks, including Al Rajhi Bank and Saudi Investment Bank, another third to Middle Eastern lenders and the remainder was borrowed from global banks.
Lenders filed about 22 billion riyals ($5.9 billion) of claims for unpaid loans in countries including the U.S., U.K. and Saudi Arabia, according to estimates by Algosaibi.
A final settlement agreement must be approved be Saudi Arabian authorities and must treat all creditors equally, regardless of their nationality, Algosaibi said today.