Mashreq exposure to Saad and Al Gosaibi Groups 'manageable'

MASHREQ EXPOSURE: Fitch says bank's exposure to troubled Saudi groups Saad and Al Gosaibi is 'manageable' (Getty Images)

Ratings agency Fitch, in an assessment made on Monday of Mashreqbank, says it should be able to absorb potential credit losses stemming from its exposure to troubled Saudi groups Saad and Al Gosaibi, given its current profitability and capitalisation levels. 

Fitch says it considers Mashreqbank's 'C' Individual rating to be consistent with the risks currently facing the bank.

However, the agency has reiterated that there are downside risks to the Individual rating given the difficult operating environment, and the impact this may have on its key financial indicators.

Mashreqbank's IDR of 'A+' reflects Fitch's view of an extremely high probability of support from the government. This reflects the size and franchise strength of the bank in the UAE as well as the support the authorities have provided to the banking system as a whole.

The agency said its view has been further substantiated by last week's announcement that the authorities were planning to offer guarantees for bonds issued by UAE banks.

News agency Bloomberg, citing unidentified sources, said on June 27 that the two firms owe 34.6 billion Saudi riyals ($9.2 billion) to more than 100 banks.

Bloomberg added that 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.

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READERS' COMMENTS

Misrepresentation of Algosaibi family
Posted by Ahmed Abdullah, Dammam, Saudi Arabia on Monday 3 August 2009 at 01:15 UAE time


Regarding articles related to the ongoing legal battle between the two Saudi business conglomerates Ahmed Hamad Algosaibi and Bros and the SAAD Group owned by Maan AlSanea, it is important to refer to Ahmed Hamad Algosaibi and Bros using their full official name rather than substituting it with the title of 'Algosaibi group'.

There exist in Saudi Arabia and the Gulf States several businesses carrying the Algosaibi name, although completely independent of the group currently entangled in a severe financial crisis. Using the general label of "Algosaibi Group" fails to make the necessary distinction amongst these unrelated businesses and therefore leads to a grave misrepresentation of the many financially stable corporations holding the Algosaibi name.

Following is a brief introduction to the two Algosaibi families through which I hope a clarification of the issue at hand is reached:

Family history is an issue of extreme value in the Saudi Arabian culture. A family’s name carries along with it a reputation that is of significant value in terms of both social and business relations within the Kingdom. It is therefore imperative that one distinguishes between the two Algosaibi families; both Saudi families with impressive business backgrounds.

Many recent articles fail to make this crucial distinction. Within them, the distinct histories of these two separate Algosaibi families are merged, thereby confusing the facts and creating a portrayal that is not only misleading, but false.

While both families sharing the name Algosaibi may have originated from Gassab (hence the common surname referring in Arabic to this village); they are not closely related and neither are the histories of their ancestors.

The Algosaibi family who is renown for the fame and fortune they created in the early 1900’s is that led by Abdulaziz, Abdallah, Abdulrahman, Hassan, and Saad Algosaibi, commonly referred to as “the five brothers”. Originating in Gassab, members of this family moved to Huraymlah, and then settled between the Eastern Province of Saudi Arabia and Bahrain where they established a business empire based largely on pearling, international trading, and a large real-estate ownership. The sons of Hassan and Ibrahim Algosaibi moved beyond the business world to the political realm forging strong ties with the late king Abdulaziz Ibn Saud, the founder of the modern Kingdom of Saudi Arabia; thereby becoming his official representatives in the Kingdom of Bahrain and accompanying him frequently as official delegates on international business affairs. Descendants of the five Algosaibi brothers currently reside in Riyadh, the Eastern Province, and Bahrain; and include two current Saudi government ministers: Ghazi bin Abdulrahman Algosaibi, and Khalid bin Mohammad Algosaibi. The original conglomerate owned and run by the five brothers split in the 1940’s; their descendents operate today several family businesses including amongst others Khalifa Abdulrahman Algosaibi Holding Company, and Abdulrahman Algosaibi GTB.

The Algosaibi family currently dominating media outlets as a result of their complex entanglement in legal battles regarding their immense financial debt and convoluted relationship with Maan Alsanea, founder of Saad Group, is not the Algosaibi family mentioned above. While the troubled Algosaibi family may have also originated in Gassab, they left it for Zubair and then eventually settled in the Eastern Province where, led by Hamad Ahmad Algosaibi, they established a money exchange in the 1940’s. Descendents of Hamad Ahmad Algosaibi currently reside in the city of Khobar in the Eastern Province of the Kingdom where they operate under the name of Ahmed Hamad Algosaibi and Bros.

Apart from the common surname and possibly shared geographical roots, there exists only a very distant relationship between the two Algosaibi families. Distinguishing between the two families and their separate histories is therefore crucial.

* Further details regarding the two Algosaibi families can be found in Michael Field’s “The Merchants: The Big Business Families of Saudi Arabia and the Gulf States”.

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