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Abu Dhabi, UAEMonday 17 December 2018

Algosaibi seeks settlement under Saudi bankruptcy law in bid to resolve 10-year legal saga

Saudi family conglomerate filed for protective settlement procedure with Commercial Court in Dammam

Simon Charlton, chief restructuring officer of Al Gosaibi. The company became the first Saudi firm to file for settlement under the new Saudi bankruptcy law. Satish Kumar / The National 
Simon Charlton, chief restructuring officer of Al Gosaibi. The company became the first Saudi firm to file for settlement under the new Saudi bankruptcy law. Satish Kumar / The National 

Ahmad Hamad Algosaibi and Brothers (AHAB) filed for a protective settlement procedure, becoming the first Saudi company under the kingdom's new bankruptcy law to do so in a bid to resolve a long-running debt dispute.

The Saudi holding company has petitioned the Commercial Court in Dammam for settlement and hopes that step will help conclude negotiations with a majority of its creditors, AHAB said in a statement on Monday.

"The bankruptcy law provides the tools to enable a resolution of this long outstanding matter," Simon Charlton, chief restructuring officer of AHAB, said. "At the very heart of the law is the equality in treatment of creditors whilst allowing the company to continue to preserve jobs and, of particular importance in this case, so that recoveries can be made from litigation to significantly boost the sums available to creditors.”

The Saudi bankruptcy law came into effect in August 2018, one of several measures the kingdom took to attract foreign investors, overhaul its economy and reduce its reliance on oil revenues. The Saudi Arabian Al Gosaibi family and Kuwaiti businessman Maan Al Sanea's Saad Group of companies have been locked in a 10-year dispute played out in international courts over who was to blame for the collapse of each other’s business empires. A Cayman Islands court ruling in June dismissed their rival claims and found both parties defrauded scores of banks out of $126 billion (Dh462.7bn).

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Read more:

Cayman Islands court dismisses claims in $126bn Al Gosaibi family feud

Saudi’s Algosaibi signs deal with banks to restructure $6bn debt

Al Gosaibi feud trial to start in Cayman Islands

Saudi Arabia urges Al Gosaibi creditors to file claims

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AHAB said that its petition under the Saudi bankruptcy law, similar to Chapter 11 in the US, effectively has “cram down” provisions that will prevent a minority of dissenting creditors from blocking a settlement agreed to by the majority of creditors.

After filing under the law, the company will continue business operations under the terms of the proposed settlement, which will preserve the livelihoods of employees and their families, allow the firm to make recoveries for creditors and enhance the province's economy, it said.

If the settlement is successful, creditors could receive 10 to 15 cents on the dollar recovery in 90 days during the first quarter of 2019, it said.

Mr Charlton said he believes a successful conclusion of the current situation under the new law can serve as a good precedent.

Since April 2016, the government formed a three-judge Joint Directorate of Enforcement at the General Court in Al Khobar (JDEK) to resolve the AHAB and Saad Group debt dispute. JDEK is close to processing all claims again AHAB.

"JDEK has undertaken the difficult exercise of evaluating and deciding upon the many claims against the company," Brett Walter, general counsel of AHAB said. "With this process nearing its conclusion, [it] is the right time to move to the Commercial Court to take advantage of the new bankruptcy law."