Saudi Arabian banks have lodged formal claims against the al Gosaibi family for immediate repayment of at least 3.2 billion Saudi riyals (Dh3.13bn) of liabilities owed by its indebted businesses.
Documents seen by The National show that at least four big banks in the kingdom have submitted claims to the Committee for the Resolution of Banking Disputes, a body set up by the Saudi Arabia Monetary Agency (SAMA), demanding immediate repayment of loans and credit facilities.
The biggest claim so far is by Al Rajhi Banking and Investment, based in Riyadh, which has asked for the immediate repayment of 1.54bn riyals from Ahmad Hamad Algosaibi and Brothers, the family partnership.
Arab National Bank, Bank Aljazira and Bank Albilad have made smaller but still substantial claims, totalling 3.2bn riyals. Other banks are also believed to have filed, or are considering filing, similar claims.
A source familiar with the situation said other big Saudi creditors, including NCB, Saudi Hollandi Bank and Saudi Investment Bank, were also pushing claims against the family, which could lift the total to about 8bn riyals.
The spate of claims is the first formal move against Algosaibi company assets by Saudi banks since the dispute between the al Gosaibi family and an estranged family member, Maan al Sanea, erupted in May 2009. It represents an escalation of the pressure on the family after months of on-off talks with creditors.
Algosaibi owes a total of about US$10bn (Dh36.73bn) to Saudi, regional and international creditors. It claims the debts arose as the result of a systematic fraud by Mr al Sanea, an allegation he has consistently denied.
The move by Saudi banks also seems to dash hopes that the so-called King's Committee, which includes representatives of the kingdom's financial, political and business establishment, can find a solution to the long-running dispute.
The source said some foreign creditors were also considering claims against Algosaibi in Saudi Arabia, with at least one member of the five-strong steering committee of international lenders involved believed to have submitted a claim in the kingdom.
The steering committee consists of WestLB, Standard Chartered, Abu Dhabi Commercial Bank, Emirates NBD and Dubai Bank.
There are estimated to be about 120 Algosaibi creditors owed a total of about $10bn, split approximately one third each for Saudi lenders, other GCC banks and foreign lenders.
International banks have so far mostly confined legal actions to courts in New York and London, with claims filed by Deutsche Bank, WestLB and others. They have been deterred by the complexity of Saudi financial law, and the hope that the government could come up with a solution.
The claim by Al Rajhi was filed in the middle of last month. It says Algosaibi had declined to repay the 1.54 billion riyals despite "numerous and repeated requests".
Al Rajhi wants the SAMA committee to freeze Algosaibi assets to the value of the claim, and to compel Algosaibi partners to repay the full amount.
Although Algosaibi is the only named defendant in the Al Rajhi claim, those by other banks list individual family members, and their heirs, as allegedly liable for the debts.
"[Algosaibi] is committed to continuing the ongoing dialogue with all stakeholders, including its dialogue with Saudi banks," said Eric Lewis, a partner at the New York law firm Baach Robinson & Lewis, which is advising Algosaibi. "The filing of these lawsuits is not surprising, and confirms that Saudi banks will be part of a normal commercial and legal process rather than subject to any extraordinary process in Saudi."