SAMA will not buy up Saad, Algosaibi debts - governor

Muhammad al-Jasser, Saudi Arabia’s central bank governor, said the bank won’t buy up debts from two family businesses that defaulted after borrowing more than $15 billion.

“Absolutely not,” al-Jasser said when asked whether the Saudi Arabian Monetary Agency would buy up the debt of Ahmad Hamad Algosaibi & Bros and Maan al-Sanea’s Saad Group from local banks.

He spoke to Bloomberg News at a meeting of central bank governors and finance ministers of the Group of 20 countries in London on Saturday.

Units of the two groups have borrowed at least $15.7 billion from more than 80 regional and international banks, according to documents provided by lenders. About $5 billion of that is owed to Saudi banks, Standard Chartered Plc said in an August 26 report.

Al-Jasser’s comment comes after the Economist Intelligence Unit said in a report this month that the “fall-out for local banks may be limited as the Saudi Arabian Monetary Agency is expected to help local banks to cover losses.”

International and regional banks are suing the Al-Khobar- based Saudi groups after both missed payments due from their Bahraini-based banking units, which are now under the administration of the Bahraini central bank.

Court cases are also taking place between the two after the Algosaibi group said in a May 22 New York filing that al-Sanea, the owner of Saad Group, used “falsified documents” to obtain $10 billion. Saad Group will respond to the claim through the judicial process, according to an Aug. 1 e-mailed statement from the company.

The Saudi government has set up a special committee to look at the debt defaults by the groups.

The Algosaibi group, a holding company with a broad range of interests from financial institutions to hotels, shipping and a bottling company, said in May it hadn’t made payments to creditors of its Bahrain-based lender, The International Banking Corporation, “pending a debt restructuring exercise.”

The Saad group, which engages in a range of businesses from construction to health care, said in June it was planning an “orderly restructuring” of its debt.

Qatar, a neighbouring Gulf state, has bought up portfolios of local banks to boost the banking industry through the financial crisis. To date, Saudi Arabia’s central bank has cut interest rates, reduced the reserve requirements for banks and placed deposits with banks.

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