Moody's downgrades Saad Group amid financial fears

The Saad Group has been downgraded by a credit ratings agency following reports that the assets of its billionaire chairman have been frozen on the orders of Saudi’s banking regulator.

Moody’s said on Tuesday that it had downgraded the ratings of Saad Trading Contracting & Financial Services Company (STCFSC), Saad Investments Company Limited (SICL) and Saad Group Limited (SGL) to B1 from Baa1.

These latest ratings were on review for further downgrades, Moody’s added.

The downgrade comes a day after the privately owned Saad Group confirmed that it planned to restructure the debt of its subsidiaries, after bankers reported that they had been told by the Saudi Arabian Monetary Authority (SAMA) to freeze the accounts of chairman Maan Al Sanea - one of the worlds' richest businessmen.

Moody's said the events had resulted in a heightened risk of default at entities within the Saad Group that were closely linked to Al Sanea – the key shareholder who also owns a 3.1 percent stake in HSBC.

Moody's goes on to highlight that the group functions in an integrated strategic, managerial and financial way closely linking the shareholder to each entity.

A further downgrade to non-investment grade would take place if STCFSC or SICL defaulted on their respective $2.75bn and $2.8bn revolving credit facilities, which are both close to fully drawn, it added.

On Monday the Saad Group confirmed it was restructuring its debt, but has so far failed to disclose the size of the plan or the number of firms that will be affected.

"Recent events, specifically affecting the Bahraini banking sector, have led to a short-term liquidity squeeze affecting Saad Group companies in the Middle East," the firm said in a statement.

"We are continuously striving to mitigate the effects of this limited squeeze, and are also planning for an orderly restructuring of the debt of affected companies in cooperation with our counterparties and international advisers," it added.

Al Sanea owns Bahrain-based Awal Bank, either directly or through Saad Group and is a shareholder in Bahrain's The International Banking Corporation.  

No specific reasons have been given by SAMA for its action over Al Sanea's bank accounts - it simply sent out a circular on Sunday telling local banks to take action.

Consultants had been appointed and were about to conclude a deal with an unnamed top European bank to manage relations with other lenders to assure "pari passu" treatment, Saad Group added.

Forbes magazine estimated Al Sanea his net worth at $8.1bn in 2008.

He was listed third in the Arabian Business 2008 Rich List.

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