Dresdner and Barclays sue the kingdom

05 December 2002

Dresdner Banksupported by Barclays Bank has filed in a New York court on the morning of 4 December a complaint against Saudi Arabia's Ministry of Finance & National Economy and the Ministry of Defence for the recovery of just over $48 million owed to a syndicate of themselves and two other banks arising from a nine-year loan facility they say has a sovereign guarantee from the kingdom (MEED 17:5:02).

The case arises from a $900 million loan to finance the lease of military compounds from the Ministry of Defence. The loan was devised to provide cash flow for the Compound Lending Corporation (CLC), a special purpose vehicle created to finance the transaction in advance of the rental income streams from the compounds. It was signed in December 2001 with the four banks equally providing the amount raised.

A statement released by Barclays on 4 December said the facility had been secured by a sovereign debt obligation of the kingdom of Saudi Arabia. 'Following several requests for the payment to be met, the banks regret that they have no other option than to start these legal proceedings,' it concluded.

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