Saudi conglomerate agrees to debt repayment plan

Repayments will rise if Cayman lawsuit is successful

A Saudi family business empire at the center of a multi-billion dollar legal dispute in the Cayman Islands has signed a settlement agreement to repay some of the funds it owes to more than 100 banks and financial institutions.

The amount that the Ahmad Hamad Algosaibi & Brothers Company is required to pay to its creditors, under the agreement, is contingent on the success of the litigation in the Cayman Islands. The trial is not impacted by the agreement and is expected to continue for the next seven months.

The Saudi conglomerate defaulted on billions of dollars of debts in what was described as one of the largest corporate collapses of the global financial crisis in 2009. It has been attempting to work out a debt restructuring plan ever since.

Complicating the process is the company’s claim that the cause of the default was that it was the victim of a staggering US$9.1 billion fraud.

It began legal proceedings in the Cayman Islands Grand Court last week in an effort to recover funds from companies linked to a former executive, Maan Al Sanea.

The Algosaibi family claims Al Sanea, who married into the family and managed its financial services businesses, engaged in massive unauthorized borrowing, siphoning off proceeds to his own companies, many of them registered in the Cayman Islands. They claim Al Sanea’s fraud triggered the downfall of the entire conglomerate and are seeking damages from the liquidators of his Cayman companies to help repay its debts.

As litigation against Al Sanea continues, AHAB has been engaged in separate negotiations to agree a comprehensive settlement with its creditors.

The company announced Sunday that it has now signed an agreement with a five-member steering committee formed to represent some of the principal claimants.

A spokesman for AHAB told the Cayman Compass the deal guaranteed a return for the creditors of between 26 and 28 cents on the dollar. The amount will rise to around 40 cents a dollar if the company is successful in its lawsuit against Al Sanea’s companies in the Cayman Islands. Separate litigation in Saudi Arabia could see the returns to claimants rise further, he said.

Simon Charlton, CEO of the conglomerate, said in a media statement, “AHAB is seeking to make litigation recoveries that we will then return to claimants through the comprehensive settlement.

“This will give claimants a significantly greater recovery than would otherwise be available to them without a settlement. This has long been AHAB’s objective and, while we are pleased with the progress that has been achieved, we will continue working hard on all fronts until it is completed.”

AHAB described the settlement as a “historic milestone” in its efforts to resolve “the largest and most complex financial dispute in the history of the Middle East.”

It said the next step in the process would be for other claimants to sign up to the settlement support agreement. To date, AHAB has agreed with other claimants (representing 89.9 percent by number and 56.3 percent by value) the amount of their claims and consented to their enforceability against AHAB as part of the settlement process, it said.

AHAB said it believed the settlement represented the best deal for all involved and would help protect the “livelihoods of employees, eases administrative burdens and costs to the court and parties, and preserve the economy of the Eastern Province and the reputation of the Kingdom of Saudi Arabia in international markets.”

Stephen Jenkins of Arab Banking Corporation, a member of the steering committee, said, “By signing the settlement support agreement with AHAB, the five financial institutions that comprise the Claimant Steering Committee have committed themselves to support the deal on the agreed terms. The steering committee remain of the view that this is the best solution to reach a comprehensive agreement that maximizes recoveries for all claimants. We now look to the full claimant group to do the same.”