Al Gosaibi family strikes initial deal with creditors to settle $6bn debt

The embattled Al Gosaibi family of Saudi Arabia has reached an initial deal with its leading creditors in a bid to settle its long-running dispute over US$6 billion worth of debts.

The deal was signed between representatives of the family partnership, Ahmad Hamad Al Ghosaibi & Brothers (Ahab), and a steering committee of some of its bank creditors, in London late last week.

It is a big step forward towards solving a six-year-old stand-off between Al Gosaibi and its creditors, which has been likened to a corporate “frozen war”. But big Saudi banks still have to be persuaded to join in any overall settlement.

“We have moved our position significantly and, without question, this deal represents the best option for financial institutions seeking recoveries,” said Simon Charlton, the acting chief executive of Ahab. “We are optimistic that the improvements to our proposal from last May will be well received by the larger group of claimants.”

Ahab met creditors in Dubai a year ago and proposed a guaranteed repayment of 20 cents on each dollar of debt, before possible recoveries from continuing litigation which could bring it up to about 50 cents.

Details of the new terms have not been announced, but it is believed the basic guaranteed payment has been increased significantly.

An executive from one creditor bank said: “We asked for more, they gave more. It looks like they were able to come up with more assets to back it. The noises from Saudi are getting better, and it may be they feel it is more in their interests to do a deal now. But it’s still not certain that will happen, and without the Saudis there cannot be a full deal. We will have a better idea by the time of the next creditors’ meeting”.

The new terms have been agreed with five financial institutions on the steering committee: Arab Banking Corporation, BNP Paribas, Emirates NBD, Standard Chartered and Fortress Investment Group, a US hedge fund.

Now it will be put to about 90 international and Arabian Gulf banks, which are owed about 60 per cent of the total, at another creditors’ meeting.

Most of the remaining debt is held by Saudi banks which have so far not taken part in the settlement talks and are taking legal action to recover their loans. In total, about 109 banks and financial institutions are owned money by Ahab.

“We believe that Saudi Arabian authorities would like to see this matter resolved in a pragmatic and comprehensive manner,” Mr Charlton said. “Upon receiving support from the wider claimant group, we will seek ratification of the settlement in the kingdom.”

Ahab said: “A final settlement agreement must be approved by Saudi Arabian authorities and, in accordance with Sharia law, must treat all claimant financial institutions equally, regardless of their nationality.”

Ahab executives believe that a new atmosphere of transparency in Saudi Arabia, which in June will open its doors fully to foreign investors, will help to persuade Saudi banks to finally take part in the negotiations, dropping their legal actions against the family in the kingdom.

One option open to Ahab is to apply to the Saudi courts to impose a settlement on Saudi creditors. A judge in Al Khobar, the headquarters of the Al Gosaibi businesses, is considering applications from Saudi creditors seeking enforcement of claims against Ahab assets that have been awarded in other courts in the kingdom.

In May 2009 Ahab defaulted on its debts, sparking the marathon battle with creditors. The Al Gosaibis blamed Maan Al Sanea, a financier who married into their family, and accused him of theft, fraud and forgery, sparking legal actions across three continents.

At one stage, it was suggested up to $20bn was owed to creditors of either Ahab or Saad Group, Mr Al Sanea’s company.

Mr Al Sanea denies all the accusations and is defending himself in several jurisdictions against actions from Ahab and from creditors.

fkane@thenational.ae

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