Saudi Arabia’s AH al-Gosaibi Group is preparing to offer improved terms to its creditors on approximately SR22bn-24bn ($5.9bn-$6.4bn) of debt.

The troubled company released a statement on 18 May, following negotiations with the steering committee.

AH al-Gosaibi will present the enhanced settlement proposal, which is still to be finalised, to its creditors at a meeting in Dubai on 2 June 2015.

The steering committee, made up of five major creditors, hopes the enhanced terms are an improvement on the May 2014 proposal, which offered a potential return of 40-60 cents on the dollar.

“These provisions of the June 2015 Proposal create an improved framework for Claimants, offering both an increase on minimum recoveries and a higher probability of material recoveries,” it said in the statement.

The new terms will include:

• A higher minimum pay-out. Under the previous proposal, claimants would have received an initial cash payment of 10 per cent of their claims.
• Claimants are to share the entire value of AH al-Gosaibi’s securities portfolio. AH al-Ghosaibi previously intended to fund lower pay-outs by selling part of the portfolio.
• Other assets will be used to ensure the minimum pay-outs, including the company’s real estate and operational assets.
• The full value of AH al-Gosaibi’s real estate assets will be at risk until claimants have received their minimum pay-outs. Claimants will retain a proportional interest to their claims as recoveries continue.
• A change in the way funds recovered in lawsuits will be distributed between AH al-Gosaibi and the claimants.

The proposal aims to end the ongoing stalemate between AH al-Gosaibi and the financial institutions, which date back to 2009 when the group first defaulted on its debts.

A total of 90 out of 109 identified claimants, representing approximately 60 per cent of overall debt, are formally involved in the settlement process, or have informed AH al-Gosaibi that they will participate.

However, the remaining creditors, a number of Saudi banks, boycotted the last meeting in May 2014, preferring to pursue their claims independently.

The claims under negotiation are liabilities related to a dispute with Saad Group, headed by Maan al-Sanea who is related to the Al-Gosaibi family by marriage.

Al-Sanea was in charge of the Bahrain-based International Banking Corporation (TIBC) bank, which allegedly issued fraudulent loans to secure funding from international banks. TIBC was owned by AH al-Gosaibi.

Al-Sanea has always rejected claims of alleged wrongdoing.

Since 2009, the Al-Gosaibi family and Al-Sanea have been embroiled in legal disputes over who is responsible for the debt, as well as how al-Gosaibi can chase recoveries of assets from Al-Sanea to repay the outstanding debts. In the meantime, Al-Sanea and some senior members of the Al-Gosaibi family have been barred from leaving Saudi Arabia.

The Saudi Royal Court froze AH al-Ghosaibi’s assets in response to the dispute. A debt settlement will only be possible if a united front of creditors can persuade the Royal Court to unfreeze the assets.