International and regional banks have given a cautious welcome to new proposals to settle a six year dispute over more than US$6 billion of debts owed by the Al Gosaibi business family of Saudi Arabia.
A “claimants meeting” in Dubai yesterday heard the details of a fresh offer from Ahmad Hamed Al Gosaibi & Brothers (AHAB), the partnership that owns the family businesses.
The new deal on offer guarantees a minimum of about 28 cents repayment for each dollar owed by the heavily indebted family, backed by equity and property assets. This was an improvement of about 25 per cent on proposals last year. Depending on recoveries from continuing litigation in the affair, the eventual return to creditors could reach 50 cents.
The Al Gosaibi businesses crashed in 2009 in a financial crisis the family blamed on a relative by marriage, Maan Al Sanea, whom they accused of fraud, theft and forgery. Mr Al Sanea has denied all the accusations made against him in courts around the world.
The steering committee of five banks representing around 60 per cent of the overall debt by value has already given its approval to the new terms. None of the 11 Saudi Arabia creditors who hold most of the balance accepted an invitation to attend the full day meeting.
“This gives the best opportunity so far for creditors to maximise recovery of their claims, and I’m confident it will be supported,” said Joseph Julian, managing director of the US financial firm Houlihan Lokey, which advises the steering banks.
A member of the steering committee said the proposals had been well received and that remaining concerns were about bringing Saudi creditors into the process and getting Saudi authorities’ ratification, rather than the proposals themselves.
The mood after the meeting was more positive than any of the previous attempts to settle the debt issue. There have been at least four previous presentations to creditors in Dubai.
One executive from a Kuwaiti bank, who did not wish to be named, said: “What we heard today was good. We need to see more detail and the formal paperwork, but so far it was good.”
A creditor from a western bank, who also declined to be identified, said: “Realistically, you won’t do much better, so we may as well agree to the new terms and move on.”
Another anonymous banker said: “The tone was much more positive and there is a momentum to the process. The questions are now about how the settlement will work.”
Simon Charlton, the chief executive of AHAB, who made the presentation to the banks, voiced his own optimism.
“I’m happy with how it went and I’m quietly confident, but nervous,” he said. “There’s a long way to go but maybe this is the beginning of the end. The banks aren’t getting all they wanted, and the family is handing over more than they wanted. But it’s the sign of a good settlement that nobody is entirely happy.”
Several members of the younger generation of the Al Gosaibi family, who are not covered by a travel ban restricting the movements of AHAB partners, attended the Dubai meeting. They will inherit a much diminished set of operating businesses if the deal goes through.
The 19 partners of AHAB have also pledged to creditors to disclose all their personal assets. An AHAB executive explained this was to ensure a “spirit of transparency in the process”.
Some creditors have suggested that family members might be tempted to hide certain assets, which has been denied by AHAB. “This was important as a sign of goodwill,” said a banker.
Under the new terms, AHAB will hand over all of its equity portfolio, valued at 2.65bn Saudi riyals (Dh2.59bm), to creditors as the first part of a settlement process that could take years.
It will also pledge its 3.5bn riyal property portfolio – mainly undeveloped land – as guarantee for future recoveries.
It is also handing over a stake in an unnamed operating company – valued at 300 million riyals by AHAB – as guarantee of recoveries.
Under a complicated formula, AHAB will be able to get some of the land portfolio back if recoveries from Mr Sanea and other parties reach certain levels over the next five years.
If the amount recovered hits 5bn riyals, AHAB will get half the land back. If recoveries bring back only 2.5bn riyals, the stake in the operating company will revert to the family.
“The family is putting nearly 90 per cent of its assets at risk, which is a sign that they want this matter settled. To prolong it is only benefiting the lawyers,” an AHAB executive said.
AHAB is in early talks with some of the Saudi banks in a bid to swing some of them in line with the international creditors. One option is to ask the Saudi legal authorities to force local banks to accept the new terms, assuming they are finally approved by other creditors.
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