x Abu Dhabi, UAEWednesday 24 January 2018

SAAD Sukkuk holders to set up committee

Investors in a US$650 million Islamic bond plan to set up a committee to represent their interests as the struggling firm undergoes debt restructuring.

Investors in a US$650 million (Dh2,3bn) Islamic bond issued by the Saudi conglomerate Saad Group plan to set up a committee to represent their interests as the struggling firm undergoes a massive restructuring of its debt. Such committees are commonplace in debt restructurings. In the case of the Saad Group Islamic bond, called the Golden Belt 1 Sukuk, the committee would deal with Citicorp Trustee Company, the acting trustee, and "any other relevant party", according to a draft resolution obtained by Reuters. A banker in Dubai who has seen the document said it was "anybody's guess" how effective the committee would be in representing investor interests, but noted that Saad had $30 billion in assets and roughly $20bn in debt, leaving investors with a reasonable level of confidence that they would be repaid. The troubles at Saad Group started in late May, when it was revealed that Saudi authorities had frozen bank accounts owned by Maan al Sanea, the conglomerate's billionaire chairman. Credit ratings agencies swiftly downgraded Saad and its subsidiaries, and the company said early last month that it was restructuring its debt. This sent ripples of concern through banks in the Middle East, many of which are owed money by the firm and had considered it a safe investment. Several banks in the UAE, including Abu Dhabi Commercial Bank, Mashreqbank, First Gulf Bank and Union National Bank, admitted they were owed money by Saad, but all so far have said their exposures were manageable. HSBC recently estimated that Saudi banks alone were owed between $4bn and $7bn by Saad, and Ahmad Hamad Algosaibi and Brothers, another struggling Saudi conglomerate that is restructuring its debts. The Golden Belt 1 sukuk, which is scheduled to mature in 2012, constitutes just a small part of Saad's overall debt. The draft resolution to form the committee to participate in restructuring talks was sent to numerous regional banks, according to Reuters, though it is unclear whether all of them are investors in the sukuk. They include Dubai Bank, National Bank of Abu Dhabi, Abu Dhabi Islamic Bank and Mashreqbank. With additional reporting by H Michael Jalili * with Reuters