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Tue 14 Jul 2009 09:54 PM

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Saudi Saad's sukuk investors mull setting up committee

Investors in troubled conglomerate look for representation at creditor meetings.

Investors in troubled Saudi conglomerate Saad's $650 million Islamic bond aim to set up a committee to represent them at creditor meetings, a draft resolution obtained on Tuesday by Reuters showed.The resolution stipulates the committee will hold talks with sukuk trustees Citicorp Trustee Company Ltd, and "any other relevant party".

The document, drawn up by law firm Mayer Brown International LLP, was emailed to a large number of banks and fund managers, but it was not clear whether all of them were bondholders.

Investors in the Islamic bond Golden Belt 1 Sukuk have taken part so far in two meetings at the London office of legal firm Norton Rose to discuss the sukuk, or Islamic bond, a source familiar with the situation told Reuters.

It is common practice for bondholders to set up a committee to defend their positions ahead of a debt restructuring.

Saad was not available for comment. Both Norton Rose and Citigroup declined to comment.

Regulators and bankers alike are grappling with the fall-out from debt restructuring at Saad Group and a second conglomerate, Ahmad Hamad Algosaibi and Brothers (AHAB), the biggest blow yet to hit the Gulf region since the start of the financial crisis.

Numerous Gulf Arab banks have said they face potential writedowns on loans made to the groups, and HSBC has estimated the lending exposure of Saudi banks alone at $4-$7 billion.

The Saad sukuk is scheduled to mature in 2012, paying coupons twice a year. The May 2009 coupon has already been paid, but it is not clear whether the November coupon will be paid as scheduled, a second source said.

The trustee had had "limited contact" with Saad group's legal counsel, Lawrence Graham, and received no further information to queries, according to a briefing document on the first meeting, obtained by Reuters. The briefing document had been drawn up by a delegate at the meeting.

Yields on the sukuk rose sharply to about 27 percent from around 12 percent within ten days in March, and jumped from that level to above 70 percent in mid-June, according to Thomson Reuters data, as investors feared a default.

A number of the banks and fund managers who received the resolution - London-based Islamic bank European Islamic Investment Bank (EIIB), German co-operative bank DZ Bank, Goldman Sachs, BlackRock Inc, CIMB, the UAE's Mashreq Bank and the Dubai Bank - would not comment.

None of the other banks replied to a request for comment. They include Malaysian bank Arab-Malaysian Banking Group (AMBG), asset manager Finisterre Capital and Bank of Montreal (BOM) as well as the National Bank of Abu Dhabi, Abu Dhabi Islamic Bank (ADIB), Arab Banking Corporation and Credit Agricole Asset Management Saudi Fransi. (Reuters)

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