Saudi's AH Al-Gosaibi defaults on $1 bln debt

[Saldin]

Saudi's AH Al-Gosaibi defaults on $1 bln debt
May 24, 2009

Ahmad Hamad Al-Gosaibi and Brothers Co (AH Al-Gosaibi), a major Saudi family-owned company, has defaulted on debt worth $1 billion, London-based Middle East Economic Digest reported in its May 22 edition.

AH Al-Gosaibi defaulted on three types of financial instruments, including foreign exchange transactions, trade finance loans and swap agreements, MEED reported, citing bankers with exposure to the firm.

Al-Khobar-based AH Al Gosaibi wasn't immediately available for comment when contacted by news agency Zawya Dow Jones.

The business weekly added, citing a source, that up to $1 billion of debt is affected.

There are also questions on whether the company will be able to meet its next payment on a $700 million loan facility due in November that was arranged by BNP Paribas and WestLB in May 2007, according to bankers, MEED reported.

Saudi and Bahraini banks, and several of the Gulf's largest international banks, have exposure to AH Al-Gosaibi's debt, MEED said.

A Bahrain-based subsidiary of AH Al-Gosaibi, The International Banking Corp, is already in default on some of its debt, MEED reported, adding that ratings agencies Standard and Poor's and Capital Intelligence have downgraded TIBC's debt to selective default and default respectively.

[Sapphire Capital]

June 18. 2009

The financial fallout from the Al-Gosaibi group on Wednesday moved stateside with a Mashreqbank court order tying the U.S. assets of the International Banking Corporation (TIBC) into any lawsuit against default.

TIBC is 100 percent owned by Ahmad Hamad Al-Gosaibi and Bros Co, one of Saudi Arabia's largest conglomerates.

Mashreqbank has not released details of the size of its liability, but John Lossifidis, head of Mashreqbank's international banking unit, claimed that were the Al-Gosaibi group to default, the impact would be "minor".

In a statement released on Wednesday, cited by UAE daily Emirates Business, Lossifidis said it was working with regulatory authorities and other banks to reach "mutually agreeable terms".

TIBC has $2.2 billion of short- and medium-term debt, according to a report from ratings agency Capital Intelligence. Creditors are not being paid on that debt "pending a debt restructuring exercise", Emirates Business reported.

In May, Standard & Poor's Ratings Services said it had lowered its long- and short-term counterparty credit ratings on TIBC to "SD" (selective default, meaning payments may not be made on some obligations) from "BBB-/A-3".

Problems at Al-Gosaibi and the troubled Saad Group, another big Saudi conglomerate, have highlighted a worrying lack of transparency in the region's family owned companies, and been partly responsible for a drying up of credit from Middle East banks available to companies within Saudi Arabia.

According to Caroline Grady, economist at Deutsche Bank, Saudi banks have extended no new net credit to Saudi corporations since September.

Al-Gosaibi and Saad groups are seeking to restructure $10 billion in debt, according to media reports.