Troubled Algosaibi owes $9.2bn to banks - sources

ALGOSAIBI LOSSES: Commerzbank analyst says markets surprised by the size of the firm's liabilities. (Getty Images)

Ahmad Hamad Algosaibi & Brothers Co., the Saudi family holding company whose Bahraini bank has defaulted, owes 34.6 billion Saudi riyals ($9.2 billion) to more than 100 banks, two people familiar with the situation have said. 

News agency Bloomberg reported the Algosaibi group held a meeting with creditors in Bahrain on June 24 to ask for a grace period of 90 days to investigate the debt, according to one person involved in the talks, who declined to be identified because the information is confidential.

A spokesman for the company, which bottles Pepsi Cola in Saudi Arabia and holds stakes in lenders including Saudi British Bank, had no immediate comment when contacted by Bloomberg.

The size of Algosaibi’s liabilities ''strikes the markets as a surprise,'' Luis Costa, an emerging-markets debt strategist at Commerzbank AG in London told Bloomberg.

''This is a problem when it comes to buying anything originated from the Middle East, how to properly measure the leverage of players there.''

Allgosaibi said on June 11 it had discovered ''substantial irregularities'' within its financial services arm after The International Banking Corporation BSC in Bahrain defaulted on debt.

An Algosaibi spokesman said last month that Maan al-Sanea, the Saudi billionaire who owns a stake in HSBC Holdings Plc, managed TIBC. A spokesman for Saad Group, al-Sanea’s holding company, denied he had a management role at the bank.

The Saudi Arabian Monetary Agency on May 28 froze the accounts of al-Sanea, according to a person who read the central bank’s circular.

Back on May 12 Standard & Poor's lowered its long- and short-term counterparty credit ratings on TIBC.

The rating was cut to 'SD/SD' (selective default, meaning payments may not be made on some financial obligations) from 'BBB-/A-3 following its decision not to fulfill its obligations toward some of its bank creditors, S&P credit analyst Emmanuel Volland said at the time.

"We understand from conversations with the CEO of TIBC and with employees of the Algosaibi Group that there is a high likelihood that the Algosaibi Group will implement a groupwide debt restructuring that will include TIBC," Volland added.

''We believe that TIBC has defaulted on some of its bank debt since the beginning of May 2009, despite the fact that TIBC holds a large equity portfolio (mainly made up of shares listed in Saudi Arabia) valued at more than $400 million on Dec 31, 2008.

"The Algosaibi Group considers these strategic decisions to be aggressive defensive protection measures," Volland noted.

"We see them as a conscious decision not to honor debt payments according to initial terms and conditions while still being able to do so," he added.

Print | Email | Discuss this article

| Share |

MORE FROM ARABIANBUSINESS.COM