Ahmad Hamad Algosaibi & Brothers Co. will take an improved offer to settle $5.9 billion of defaulted debt to more than 80 banks next month as it seeks to end a six-year impasse after the biggest default in the Middle East.
Under the new proposal, which was agreed with leading creditors last month, Algosaibi is offering to divide the value of a share portfolio between creditors, instead of using it to pay 2.4 billion riyals ($640 million) as proposed last May. Algosaibi’s real estate portfolio will also be pledged to guarantee additional payments up to its full value of 3.5 billion Saudi riyals, instead of it just being used as collateral for payments of as much as 2.4 billion riyals, the company said in an e-mailed statement on Monday.
“The revised terms of our proposal were reached after a long and intense period of negotiations with the steering committee,” Simon Charlton, acting chief executive officer at the Saudi Arabian company, said in the statement. “We believe this is the best possible deal for all parties.”
Algosaibi and billionaire Maan al-Sanea’s Saad Group defaulted on at least $15.7 billion in 2009 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.
The company agreed on the proposal with a steering committee of five lenders in April and will present the new terms to remaining creditors at a June 2 meeting in Dubai.
‘Finite Pool of Assets’
The new proposal builds on one by the company last May which offered to guarantee banks at least a 20-cent 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.
Units of Algosaibi and Saad borrowed from lenders to finance investment and expansion into real estate. Lenders filed about 22 billion riyals of claims for unpaid loans in countries including the U.S., U.K. and Saudi Arabia, according to estimates by Algosaibi.
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’ll participate, the company said in April.
“This whole affair has persisted for too long and at too great a cost,” Charlton said in Monday’s statement. “There are finite pools of assets, which are being diminished both by the time value of money and huge fees for a cadre of advisers on all sides. It’s in everyone’s best interests to bring this matter to a close.”