Saudi Arabia banks key to debt settlement

08 May 2014

AH Al-Gosaibi’s plan to settle its debts will only bear fruit if Saudi and foreign lenders work together

The plan by Saudi Arabia’s Ahmad Hamad Al-Gosaibi & Brothers (AH Al-Gosaibi) to bring an end to a five-year stalemate with its creditors over about $6bn of debt is dependent on both the foreign and local banks involved returning to the negotiating table.

More than 60 banks attended a creditors’ meeting in Dubai and heard AH Al-Gosaibi’s plan to offer them a potential return of 40-60 cents on the dollar if it succeeds in making recoveries through legal action against Saudi businessman and founder of Saad Group, Maan al-Sanea. Al-Sanea has always rejected claims by AH Al-Gosaibi of wrongdoing.

However, the Saudi banks were conspicuous by their absence at the meeting, having boycotted it to independently pursue their claims against the firm. The international creditors are now considering whether to accept the principles of the deal and resume talks with AH Al-Gosaibi. However, a successful truce between the company and its creditors is unlikely unless the local banks rejoin the negotiations.

All creditors will be in a better position to get a Royal Court freeze on AH Al-Gosaibi’s assets lifted, if they approach the government as a united front with an agreed debt settlement plan. The Saudi banks are trying to put through their own enforcements. But it is thought they will be unsuccessful in persuading the government to remove the freeze that allows repayment to them, but leaves the international creditors with nothing. This situation would damage Saudi Arabia’s reputation. 

If the Saudi banks do not return to the table and no consensus among creditors is reached, the current stalemate in negotiations will drag on for many more years. 

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