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Exclusive: First Saudi Arabian-linked banks join al-Gosaibi debt settlement plan

Reuters  |  DUBAI 

By Tom Arnold

(Reuters) - Two Saudi Arabian-linked banks have become the first lenders with ties to the kingdom to sign a debt settlement plan with Ahmad Hamad al-Gosaibi and Brothers (AHAB), the company's executive said, opening the way for the conglomerate to try to push through a multibillion-dollar deal with creditors.

Since defaulted on about 22 billion riyals ($5.9 billion) of debt in 2009, Saudi banks and those with links to the kingdom have refused to join other creditors in a debt settlement deal, arguing the terms on offer were not satisfactory.

But in the last few weeks, Bahrain-based (GIB), 97 percent owned by Saudi Arabia's Public Investment Fund, and Alawwal Bank, Saudi Arabia's oldest lender and 40 percent owned by Royal Bank of Scotland, have signed the deal with AHAB, sources familiar with the process said.

Senior Saudi Arabian officials are keen to get a debt dispute related to and resolved as the kingdom embarks on a huge overhaul of its that hinges upon attracting foreign investment.

"We hope that more Saudi Arabian banks will join the settlement in the coming weeks, but as we have reached the threshold under the we are prepared to seek a deal through that route, if necessary," said Simon Charlton, AHAB's restructuring executive.

declined to comment, while GIB did not respond to a request for comment.

Eleven banks majority owned by Saudi Arabian shareholders have exposure to AHAB, of the total of 94 creditor institutions.

The settlement means now has 70 percent of creditors in support of the deal, representing more than 50 percent of the debt.

Under the new bankruptcy law, approved by the cabinet earlier this year, companies can push through a debt restructuring deal if creditors representing at least two-thirds in number and 50 percent in value support a deal.

"is confident that, if it needs to, it can use the bankruptcy legislation and, if it does, it would be the first company to do so," said Eyad Reda, at in and to

Both GIB and sold their exposure after signing the deal. was not able to confirm the buyer of the debt, but hedge funds and other traders specialising in distressed debt have shown an increased interest in the debt of and Saad in recent months.

More than 1.5 billion riyals of AHAB's debt has traded in the past month, with sources attributing that to anticipation of a breakthrough in the row.

The value of AHAB's debt has risen from around 12 cents on the dollar at the start of last year to 19 to 20 cents now.

($1 = 3.7503 riyals)

(Reporting by Tom Arnold; Editing by Mark Potter)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, April 17 2018. 20:46 IST