Saudi Group Signs Deal Aiming to End Biggest Mideast Default

  • Deal with lender committee restructures $6 billion of debt
  • Some 90% of creditors sign deal recovering about 40% of claims

Saudi Group Signs Deal to End Biggest Mideast Default

Ahmad Hamad Algosaibi & Brothers Co. signed a deal with a majority of its creditor banks to restructure about $6 billion of debt, taking the Saudi conglomerate one step closer to ending a seven-year impasse over the Middle East’s biggest default.

The agreement with a five-member committee representing about 80 banks, which include BNP Paribas SA and Standard Chartered Plc, formally commits Algosaibi and the lenders "to support the implementation of the agreed settlement terms," the Saudi Arabian company said in e-mailed statement on Monday. About 90 percent of the creditors, accounting for 56 percent of the value of the debt, have signed the deal, and the remaining lenders will be asked to sign in the next few weeks, Algosaibi said.

Algosaibi and billionaire Maan al-Sanea’s Saad Group, two family holding companies related by marital ties, defaulted on at least $15.7 billion in 2009 as the global economic crisis froze credit markets and asset prices slumped. The companies have been locked in legal disputes ever since. The restructuring talks involved local and international lenders including U.S. hedge fund Fortress Investment Group LLC.

Algosaibi, which has interests ranging from construction to shipping, made an improved offer to banks last year, guaranteeing they would recover at least 40 percent on the debt. Algosaibi plans to pay creditors at least 28 cents on the dollar using a share portfolio, 3.4 billion Saudi riyals ($906 million) of real estate assets and a minority stake in an operating business valued at 300 million riyals. Depending on asset recovery and litigation, it will also pay an additional 6 billion riyals.

’Best Solution’

"This is the best solution to reach a comprehensive agreement that maximizes recoveries for all claimants," Stephen Jenkins of Bahrain’s Arab Banking Corp., a member of the committee, said in the statement. "We now look to the full claimant group to do the same."

The restructuring plan also needs the approval of a three-judge panel at a court in Khobar, in eastern Saudi Arabia, which has been appointed to oversee the claims against Algosaibi.

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