Saudi Arabia’s Algosaibi calls banks for Dubai meeting on $5.9bn default

Ahmad Hamad Algosaibi & Brothers Co invited creditors including BNP Paribas and Standard Chartered to discuss claims on US$5.9 billion of debt as it seeks to recover from the Middle East’s biggest default.

The Saudi Arabian company, with interests ranging from construction to finance, will “outline proposals aimed at achieving a comprehensive settlement” with more than 70 creditors at a May 7 meeting in Dubai, according to a copy of an invitation sent to banks on Sunday and seen by Bloomberg News. The company didn’t give further details on the proposed terms.

Banks rejected an original debt restructuring proposal from Algosaibi four years ago. Algosaibi and billionaire Maan al-Sanea’s Saad Group defaulted on at least $15.7bn 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.

Lenders including Deutsche Bank and Bank of Tokyo Mitsubishi have filed about 22 billion Saudi riyals of claims for unpaid loans in courts in countries including the US, UK and Saudi Arabia, according to AHAB estimates.

Algosaibi hired Simon Charlton, former head of forensic services in the Middle East for Deloitte, as chief restructuring officer and Ben Jones, also from Deloitte, as chief financial officer last June to restructure its operations.

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 to global banks, Mr Charlton said in an interview in Dubai on March 25.

Terms of the revised deal to be offered to banks in May are likely to be less favourable than those rejected by lenders in December 2009 because the value of the company’s “operating assets has fallen significantly as all non-Saudi assets have been foreclosed on or seized by potential creditors,” Mr Charlton said. “Assets at a most optimistic valuation would meet only a proportion of the claims” made against the company, he said.

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

The company’s current assets, including a share portfolio and land bank, are worth between 4.2bn riyals and 5.2bn riyals, Mr Charlton said.

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