Saudi central bank says Saad in local debt deal

DEBT DEAL: Saad Group strikes deal with local creditors according to SAMA head. (Getty Images)

Saudi Arabia's central bank governor on Monday said that troubled Saad Group has struck an agreement with Saudi creditors to repay syndicated and bilateral loans.

Asked how he felt about an agreement between Saad and local creditors, Saudi central bank governor Muhammad al-Jasser said: "Any agreements are good ... This is something between the creditors and the borrowers. My understanding is they have agreed to settle."

A Saad spokesman in London could not be reached for comment while a Saudi-based spokesman declined to comment.

But the reported deal, which has left international creditors in the cold, drew the ire of the UAE which said 13 banks in the country were exposed to Saad and Ahmad Hamad Algosaibi and Bros Co (AHAB).

And Oman said its banks may need to take more provisions this year after Saad and AHAB defaulted on billions of dollars of debt, while Bahrain said Saad and AHAB had legal obligations towards the two firms' banking subsidiaries in the island kingdom.

On Sept. 17 two bankers said a Saudi government panel had brokered a deal between local creditors and Saad Group. One banker said the deal covered repaying syndicated loans worth $700 million and bilateral loans of unknown volume.

The banks agreed to a 15 percent haircut on the outstanding debts to reach the accord.

Jasser, who was speaking at the annual meeting of the Arab Monetary Fund which gathered Arab central bankers in Abu Dhabi, said the Saudi central bank - known as the Saudi Arabian Monetary Agency (SAMA) - was not involved in this agreement.

Saad and AHAB are embroiled in a legal battle in the United States after defaulting on debts, with some bankers warning the total cost of writedowns may hit $22 billion and affect around 120 banks.

"SAMA have their own point of view," said UAE central bank Governor Sultan Nasser al-Suweidi, when asked about the deal.

In June Suweidi appealed to SAMA to lift a freeze on the accounts of Saad Group chairman, Maan al-Sanea, saying the funds should not be "ring-fenced."

The debt implosion is the biggest corporate scandal to hit the Middle East since the start of the global financial crisis and struck at the profitability of banks in the region, which have raised provisions to cover loan losses.

The Saad deal with local Saudi banks, which banking sources said involved seven banks and covered total debts of 9 billion riyals ($2.4 billion), has left international banks - including those from the Gulf Arab region - wondering if they were sidestepped.

"As far as we are concerned we will deal with the shareholders of the banks. They have legal obligations," Rasheed al Maraj, Bahrain's central bank governor, said on Monday, adding the legal ties were through Saad and AHAB's Bahraini banking units, Awal Bank and TIBC, respectively.

Bahrain seized the two banks in July, citing a substantial shortfall in their assets compared to liabilities. It has since appointed external administrators to run the banks. (Reuters)

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READERS' COMMENTS

To Mohammad Ali
Posted by Dan, Stockholm, Sweden on Tuesday 29 September 2009 at 21:37 UAE time


Very good Mohammad. So I guess it means all the companies in other countries who borrowed money from Saudi Arabia don’t have to pay it back either? Very good mentality.

Which creditors should be repaid first?
Posted by Mohammad Ali, Dhahran, Saudi Arabia on Tuesday 29 September 2009 at 14:38 UAE time


Since Saad made his wealth from Saudi Arabia, and I guess it is logical to repay his local creditors first. The international creditors took a risk in financing Saad and they should just forget about getting their money back and write if off.

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