Ahmad Hamad Algosaibi & Brothers Co. has invited financial institutions with claims against the company to attend a meeting in Dubai on May 7, at which time AHAB will outline the terms of a new settlement agreement.
The move by the Saudi conglomerate may break the stalemate that has existed since late 2009 when AHAB’s last proposal was rejected by financial institutions, many of which chose instead to pursue claims through litigation.
In 2009, AHAB’s Bahrain unit, the International Banking Corp. and Awal Bank collapsed and defaulted on an amount estimated as high as $22 billion.
Maan al Sanea, the billionaire owner of Awal Bank and head of the Saad Group, who married into the Algosaibi family, has been accused by the Algosaibis of borrowing billions of dollars without authority, using forged documents and then siphoning the majority of funds for his own use, after he was put in charge of the group’s financial business.
Mr. Al Sanea and the Saad Group have consistently denied the allegations, which prompted lawsuits in several countries, including the Cayman Islands, where a number of Saad Group companies were registered.
In 2012, the Cayman Islands Grand Court ruled in favor of AHAB, requiring Maan Al Sanea to pay AHAB $2.5 billion, the amount earlier requested by AHAB as an interim payment.
The court’s award was based on what it termed “compelling” evidence of “a pattern of massive payments to Saad Group.” The court found these payments, which were directed by Mr. Al Sanea, to be “inexplicable having regard to the nature of AHAB’s business” and declared that AHAB’s allegations that Mr. Al Sanea misappropriated billions of dollars were “now deemed proven against Mr. Al Sanea.”
The ruling was based on the court’s review of the affidavit evidence of Simon Charlton, the Deloitte partner who led the forensic investigation of Mr. Al Sanea’s businesses in Saudi Arabia and elsewhere between 2002 and 2009.
Mr. Charlton was named AHAB’s acting chief restructuring officer and acting chief executive in 2013. Explaining the proposed settlement, he said, “AHAB is restructuring its business and the only way to move on from the massive borrowing fraud committed by Maan Al Sanea is to reach a comprehensive resolution with all banks with bona fide claims.”
The latest settlement proposal would be based on AHAB’s existing assets and any funds that will be recovered from Mr. Al Sanea in the future. The Saudi conglomerate estimates its own assets at between 4.2 billion riyals and 5.2 billion riyals (US$1.1 billion and $1.4 billion), less than a quarter than the approximately $5.9 billion in claims made against AHAB in Saudi Arabia.
AHAB and Saad group units had borrowed from more than 80 regional and international banks to finance real estate and other investments in Saudi Arabia and the region.
About a third of the debt is owed to Saudi banks, another third to Middle Eastern banks and the remainder to global lenders.
Since the first settlement offer in 2009, which pledged about 6 billion riyals over a period of five years, the value of operating assets has fallen considerably as non-Saudi assets have been foreclosed on or seized by potential creditor, according to AHAB.
AHAB assets include land, shareholdings, real estate and manufacturing companies. However, since most of the group’s assets are subject to an asset freeze, the difficulties of accessing credit have left AHAB unable to make necessary investments in its operating units. In January, AHAB lost the right to bottle PepsiCo drinks, an agreement the company had for 60 years and one of its more significant operations.
AHAB continues to pursue cases against Mr. Al Sanea for misappropriation of funds, fraud, return of shares, and other damages in Saudi Arabia, the United States and the Cayman Islands.
In February 2013, the Cayman Islands Grand Court refused applications to strike out AHAB’s claim and decided the action, in which AHAB seeks to recover $6.2 billion in claims and damages, should go to trial. In November 2013, the court directed the trial to commence in April 2016.
AHAB is also seeking to recover shares worth $850 million from two Saudia banks which foreclosed on the share portfolios when they were allegedly subject to a freeze order. The proceeds would be redistributed to creditors in the restructuring deal.
In a press release, AHAB claimed it had always proactively engaged with all of the local, regional and global banks involved, and made clear its desire to negotiate a collective settlement.
“AHAB believes now is the time to reach a comprehensive solution and is prepared to offer a substantial portion of its assets to achieve that goal,” Mr. Charlton said. “We look forward to a productive dialog and process that results in a fair agreement for all stakeholders.”