Saad denies debt deal with Saudi banks

25 November 2009

International institutions fear the company will only repay them once it has met obligations in the kingdom

Local conglomerate Saad Group has denied it has a deal in place to repay billions of dollars it owes to Saudi banks before it pays off its debts to regional and international banks.

In a letter to creditors in mid November, seen by MEED, the company says it is “not a party to any settlement or agreement with the Saudi banks”.

In September, Saudi banks said that Saad had agreed to pay their debts, provided the holders of unsecured loans accepted a 15 per cent reduction in the amount Saad owes them.

On 28 September, Muhammad al-Jasser, governor of the Saudi Arabian Monetary Agency (Sama), the country’s central bank, said that Saad had agreed to repay an unknown sum, believed to be in the billions of dollars, to the Saudi banks.

According to one Riyadh-based banker, Saudi banks that have secured loans with Saad have already moved to seize some assets that were used as security.

“In some cases, banks have already started to sell assets they have security over to settle the loans,” says the banker.

Another banker in Saudi Arabia says Saad is playing a “dangerous game” by denying it has a deal to repay the Saudi banks, especially as the governor of Sama has publicly stated that Saad had reached an agreement with its local creditors in September.

The governor’s comments gave international creditors concern that the company would only repay its debts to them once it had met its obligationss to creditors within the kingdom.

“This whole affair is affecting the credibility of all Saudi corporates in the eyes of international banks,” says the banker.

International banks with exposure to Saad include France’s BNP Paribas, Deutsche Bank, the US’ JP Morgan and the UK’s Royal Bank of Scotland (RBS).

Saad’s letter also says the company is considering whether to sue banks, including the UK’s HSBC, RBS, the local Sabb, and the US’ Citigroup. The four named banks froze Saad’s accounts in May this year when the company first defaulted on its debt repayments.

The letter argues that freezing the accounts complicated the company’s efforts to service its debts.

Saad Group is currently embroiled in a legal dispute with another Saudi conglomerate, Ahmad Hamad al-Gosaibi & Brothers. Between them, the two groups owe about 100 banks more than $20bn.

Al-Gosaibi alleges in a law suit filed in New York that Saad’s chairman, Maan al-Sanea, perpetrated a fraud worth up to $10bn.

In its letter, Saad says it plans to meet all creditors who are not suing the company, and will reveal its plans for restructuring its debts at the meeting.

A banker at one international institution says the letter is a bid to prevent further lawsuits.

“It seems that Saad is trying to urge the banks to forego launching any legal claims in order to help it run a more orderly restructuring process,” says the banker.

Saad did not respond to requests to comment.

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