Saudi banks finally get some of their loans repaid

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Saudi banks finally get some of their loans repaid

BNP Paribas SA and Citigroup Inc. are among world bankers which finally have to see some of their loans repaid after getting caught up in one of the biggest corporate defaults in Saudi Arabia.

The kingdom s new bankruptcy law, Algosaibi Brothers Co. had the proposal of restructured debt approved by a Saudi court, where Simon Charlton, the business owner of Ahmad Hamad Algosaibi, locked in legal battles and negotiations with creditors over $7.5 billion since 2009, had his interest to restructure the obligations ratified by a Saudi court?

The order from Commercial Court in Dammam, in Saudi Arabia's Eastern Province, will allow various asset freezes to be lifted and let the company go ahead with a plan to repay creditors around 26% of their claim values through a mixture of cash, shares and Saudi real estate.

The long-running debt saga surrounding AHAB, as the company is known, had stained the kingdom's reputation while it attempted to attract more foreign investment to help finance a plan to diversify the economy. In 2020 the court approved claims from more than 100 regional and international banks, hedge funds and other creditors in 2020.

AHAB s default rippled among some of the largest global banks and exposed poor lending practices among some of them, with loans often being made to wealthy families and large Middle East conglomerates often based on their name and reputation alone.

Lenders including JPMorgan Chase Co. HSBC Holdings Plc, Morgan Stanley and Barclays Plc all had exposure to AHAB. Since its default, many banks have sold their exposure to the company to hedge funds.

Algosaibi, which had interests from construction, shipping and hospitality, was engulfed in a global court dispute with Maan al-Sanea, a Saudi tycoon who married into the Algosaibi family and managed its finance business. The bankruptcy law, which came into force in 2018, has been instrumental in allowing AHAB to push through the agreement.

Passing the bankruptcy law had the greatest impact that made this end possible and led to the settlement of all the company s debts, said Samah Algosaibi, a board member of the company, in a statement to Bloomberg.

Previous attempts at securing a restructuring deal had been blocked by some creditors, preventing any agreement from moving forward even with the majority of creditors on board. In the end the company secured agreement in its debt plan from 98% of its creditors value.

The plan involves AHAB contributing 90% of its assets to paying off debts, with the rest restructured to carry on operating.

I have worked on a number of restructurings and investigations around the world over 30 years ago, and this one has been one of the most complex and hardest to solve, said Charlton, who was previously a restructuring specialist at Deloitte.

Initial payments to creditors will come from $1.2 billion rs $4.5 billion in cash and equities owned by the group and could be made before the end of the year, Charlton said. It will then look to sell one of its businesses and create a real estate fund to manage approximately 2.5 billion rials of assets.