Saudi Arabia’s Ahmad Hamad Al-Gosaibi & Brothers (AH Al-Gosaibi) presented a settlement proposal to its creditors in a closed meeting in Dubai on 7 May, in an attempt to come to an agreement on about SR22bn-SR24bn ($5.9bn-$6.4bn) of debt.

The deal is intended to end the “stalemate” between AH Al-Gosaibi and the banks dating back to 2009 when the group first defaulted on its debts, according to Simon Charlton, acting CEO of the group.

“What I wanted to get out of today is an indication from bankers here as to whether or not they are interested in entering into a negotiation to settle the situation,” he tells MEED.

The claims asserted by the banks and financial institutions refer to liabilities related to a dispute with Saad Group, headed by Maan al-Sanea. Al-Sanea has always rejected claims of alleged wrongdoing.

The current proposal presented to creditors by Charlton proposes an upfront payment equal to 10 per cent of creditors’ claims as a show of “good faith”.

It then outlines a plan that could offer creditors between 40-60 per cent of their claimed amounts, if AH Al-Gosaibi can successfully recover funds.

These recoveries would be a result of civil lawsuits against Al-Sanea and entities controlled by him in the Cayman Islands and Saudi Arabia, as well as claims against two local lenders – SABB and Samba – for the value of two share portfolios once owned by the group and seized by banks in a move AH Al-Gosaibi says breaks Saudi laws.

AH Al-Gosaibi proposes to guarantee a minimum recovery of 20 cents on the dollar, backed by the company’s real estate portfolio. This means that after five years, if creditors have not been able to secure 20 per cent of their claims, they can make a claim against the company’s pledged property assets.

“We will underwrite that second 10 per cent by pledging security of what is really our only valuable asset,” says Charlton, adding that there is the possibility of creditors reclaiming far more than 20 cents on the dollar.

“If we are successful in a third of our claims, we hit 40 cents,” he says.

Following the outline of the proposal, the next step is for creditors to agree to the principles of the deal and form a working group to enter into negotiations with AH Al-Gosaibi over the exact terms of the agreement.

The success of the proposed deal rests on the involvement of the Saudi banks that hold about a third of the debt. The local institutions refused to attend the Dubai meeting, looking to pursue their own independent attempts to recover assets.

Currently, all of AH Al-Gosaibi’s assets are frozen by the government and Charlton does not expect the Saudi banks’ attempt to enforce their claims to be successful.

“I don’t think the government will lift the freeze so the Saudi banks get paid and international banks get nothing,” he says, adding that without their involvement, reaching a settlement will be near impossible.

“If the Saudi banks are successful with their enforcement, there will be no deal. It will be a scrum, a free-for-all and many years of litigation with uncertain terms,” he says.