Saad Group, the troubled Saudi conglomerate, has struck a deal with local banks to settle more than US$700 million (Dh2.57bn) in debts, according to media reports. Saad Group and its owner, the billionaire Maan al Sanea, have been mired in a series of court battles amid demands for repayment of debts since the company began defaulting on financial obligations in April and May.
The latest news of a deal with Saudi banks is the first real sign of progress in the company's efforts to restructure debt as it fights off creditors and defends itself against accusations by Ahmad Hamad al Gosaibi and Brothers (AHAB), another struggling, family-run Saudi conglomerate, that Mr al Sanea defrauded it to the tune of $10bn. The problems at Saad Group started when Mr al Sanea's assets were frozen by Saudi authorities in late May. Since then a judge in the Cayman Islands, where many of the group's assets and businesses are stationed, has ordered a freeze on $9.2bn of the firm's assets.
According to a Reuters report citing unnamed Saudi bankers, lenders in Saudi Arabia came to terms on $700m in loans given by consortiums of banks, plus an undisclosed amount in direct loans. The deal, according to one banker, involved banks forgiving 15 per cent of the debts. It excluded loans provided to Saad by international banks. By some estimates, Saad's total debt load, including what it owes to international banks, is above $20bn.
The settlement disclosed yesterday has already stirred concern among international lenders. They are worried that the agreement means fewer of Saad's assets will be available to take care of debts owed to them. "We are concerned that if local banks are separated from international banks it makes for an incredibly inefficient process," one Dubai-based banker told Reuters. "If they differentiate between national and local banks, this will cause a much bigger impediment for big international banks to work with local borrowers," the banker said.
The bulk of Saad's debt is thought to be held by banks outside Saudi Arabia. Standard Chartered, an international bank that is owed money by Saad, has estimated that Saudi banks are owed about $5bn by Saad and AHAB, which is also undergoing a debt restructuring exercise and fighting off legal action by creditors. AHAB has claimed in a suit in New York that its loan defaults can be pinned on Mr al Sanea, who is accused of looting the company of $10bn when he headed AHAB's Money Exchange, a subsidiary that brokered money transfers for Saudi workers.
Mr al Sanea, according to AHAB, used forged documents to take out loans in its name, and then shunted the proceeds into his own accounts and the accounts of companies controlled by him. * with Reuters