Saad unit defaults on sukuk

Asa Fitch

• Last Updated: November 15. 2009 8:14PM UAE / November 15. 2009 4:14PM GMT

A Saad Group subsidiary says it is unable to make payments on a US$650 million (Dh2.38 billion) Islamic bond maturing in 2012.

Saad Trading, Contracting and Financial Services, part of the struggling family-owned conglomerate based in Saudi Arabia, said yesterday it was “impossible for the issuer to perform its payment obligations under the sukuk”.

It made the disclosure in a statement to the Bahrain Stock Exchange, where the Golden Belt 1 sukuk is listed.

The default comes as the Saad Group, founded by Maan al Sanea, slogs through a tangle of legal and financial difficulties. Authorities in Saudi Arabia froze its assets this summer and a court in the Cayman Islands, where many Saad Group subsidiaries are incorporated, froze an additional $10bn of assets this year.

Last week, an Abu Dhabi court placed assets of the Saad Group and Saad Trading in the UAE under its protection, citing unpaid debts with an unnamed bank in the emirate.

Those actions, Saad said, made it impossible for the firm to make rental payments on its sukuk.

“Freezing orders in Saudi Arabia and other jurisdictions have rendered impossible the ability of Saad Trading, Contracting & Financial Services to perform its payment obligations,” it said.

Mr al Sanea, the chairman of the Saad Group, has been accused by Ahmad Hamad Al Gosaibi and Brothers, another struggling Saudi conglomerate, of masterminding a $10bn fraud against it. He has denied the allegations.

Banks and investors are estimated to be owed more than $20bn by the Saad Group and its subsidiaries, and lenders have taken legal action against the company in New York, the Cayman Islands and the Gulf.

The Al Gosaibi group is also enmeshed in lawsuits over defaults on debt and other transactions as it works towards a restructuring agreement with creditors.

Investors in the sukuk in July set up a committee to represent them in Saad’s debt restructuring.

One banker said at the time that it was “anybody’s guess” how effective the committee would be.

Saad yesterday urged investors to “refrain from proceeding with any legal action” over the default, and expressed its commitment to resolving its debt problems.

“The Saad Group continues to exert every effort through the relevant legal processes to resolve these issues to be able to perform its obligations towards its creditors, including to the issuer and the certificate holders,” it said.

Mashreqbank, a lender based in Dubai that is owed about $400m by Al Gosaibi and a Bahraini banking subsidiary, said yesterday in a statement posted on the Dubai Financial Market website that it had not received an offer to settle debts with the Saad and Al Gosaibi groups, as had been reported earlier this month.

afitch@thenational.ae