Mashreqbank is suing Ahmad Hamad Al Gosaibi and Brothers, a struggling Saudi conglomerate, for US$398 million (Dh1.46 billion) in UAE courts, in an extension of US legal actions filed this year. The Dubai-based lender confirmed in a statement that it had filed court papers to recover the money, including $225m Mashreq has already claimed it is owed in separate cases filed over the summer in New York.
It did not say what additional transactions it was disputing to reach its total claim. A spokesman for Al Gosaibi could not be reached for comment yesterday. The bank "confirms legal proceedings are under way in the UAE for the claimed amount of Dh1.46bn owed to it", the statement said. The case adds to a list of litigation surrounding the Al Gosaibi group, which is also embroiled in legal tangles in London.
Mashreq and the German lenders Deutsche Bank and Commerzbank are among creditors of the group that have filed suits claiming Al Gosaibi defaulted on large financial obligations in April and May. Mashreq's claims in New York stem from a pair of currency swap agreements that it says Al Gosaibi and The International Banking Corporation, a Bahraini bank it owns, failed to honour. The bank says it wired Al Gosaibi $225m and was supposed to receive the equivalent amount in Saudi riyals in exchange.
Mashreq alleges that Al Gosaibi did not keep its side of the agreement. Al Gosaibi has countered by claiming that its failure to make payments is traceable to a $10bn fraud allegedly carried out by the Saudi billionaire Maan al Sanea over a period of decades. Mr al Sanea allegedly took out loans under Al Gosaibi's name using forged signatures and then diverted the proceeds to accounts controlled by him and the Saad Group, a large conglomerate he owns and runs.
He has had his assets frozen by Saudi authorities and by a court in the Cayman Islands, where many of Saad Group's subsidiaries are incorporated. The case has caused concern throughout Saudi Arabia's tight-knit business community. It has also hurt the region's banks, which have been re-evaluating the long-standing practice of "name lending", or lending based on a company's reputation and size rather than a full analysis of its ability to repay.
Banks have been setting aside huge provisions to cover loans made to Saad and Al Gosaibi, both of which are undergoing sweeping debt restructurings. Listed banks in the GCC booked more than $3bn in provisions in the first half of the year partly due to exposures to the groups. Analysts expect more provisioning as third-quarter bank results start to trickle in. The Central Bank revealed last month that 13 UAE banks were owed money by the groups. Mashreq has one of the highest exposures among banks that disclosed how much they were owed.
The bank said in New York court documents that its total exposure to Al Gosaibi alone was more than $400m. @Email:firstname.lastname@example.org