Al Gosaibi offers debt deal and faces new $1.9bn legal claim

In total, banks could receive more than 50 per cent of their debts if litigation against Maan Al Sanea, the head of Saad Group and related by marriage to the Gosaibi family, is successful in recovering significant assets.

The Al Gosaibi business family yesterday offered an olive branch to creditors owed US$5.9 billion since 2009, as it was hit by a fresh legal claim for $1.9bn arising from the banking collapse that sparked their financial crisis.

The Al Gosaibis offered creditors 20 cents on the dollar – 10 cents immediately and a guarantee of another 10 cents after five years backed by property assets – in an attempt to end the five-year dispute between the Saudi conglomerate and its bankers.

In total, banks could receive more than 50 per cent of their debts if litigation against Maan Al Sanea, the head of Saad Group and related by marriage to the Al Gosaibi family, is successful in recovering significant assets.

However, it also emerged that the family is to face a new legal action in Bahrain over The International Banking Corporation (TIBC), one of the banks that defaulted on loan repayments in 2009, triggering the Al Gosaibis’ problems.

Trowers & Hamlins, the administrator appointed by the Bahrain Central Bank to oversee recovery of TIBC assets, filed the action in Bahrain alleging “the creation of a fraudulent loan book” that allowed the bank to raise “enormous sums” that the Al Gosaibis then used for their own account.

With the new action, the administrator is now claiming a total of $3bn from Al Gosaibi in legal cases in Bahrain and Saudi Arabia.

Simon Charlton, the chief executive of Al Gosaibi group, said: “We flatly reject these claims, which are the subject of criminal proceedings in Bahrain.”

The Al Gosaibis blame Mr Al Sanea for the collapse of the business, which led to one of the biggest financial scandals to hit the Middle East, involving some $20bn of debt to Saudi, regional and international lenders.

Mr Al Sanea continues to adamantly deny all the charges brought against him in courts on three continents.

At a meeting in Dubai on Wednesday, Mr Charlton presented the new repayment offer to executives representing about 55 creditors. “They were receptive and willing to re-engage,” he said.

Most creditors were reluctant to discuss their reaction to the proposals. Those who commented declined to be named.

“It is good that there was a meeting, it is always better to talk. We are considering our response,” said one.

Another said that the next step would be to form a creditors’ committee from among the 80 or so lenders and investors in Al Gosaibi. Some banks have sold their debt to distressed-asset traders over the past five years, others have written it off as bad debt.

There were no Saudi bankers at yesterday’s meeting. Banks from the kingdom have taken legal action in Saudi to recover their loans, thought to amount to about a third of the total.

Mr Charlton said he was “cautiously optimistic” that the new terms could form the basis of a settlement in the long-running dispute.

In a formal presentation, Mr Charlton told creditors: “Al Gosaibi will fund a recovery effort that could lead to recoveries in excess of 50 cents on the dollar.

“Currently, we are at an impasse. All of the assets outside Saudi Arabia are gone; all of the assets inside KSA are frozen.

“The alternatives to our proposal are continued litigation, continued delay, and a likely return lower than what Al Gosaibi is prepared to guarantee today.

“The only way forward is the creation of an environment and a process in which the parties work in a consensual way to maximise recoveries and approach the Saudi authorities.”

A similar deal was rejected scornfully at a meeting of creditors in Dubai in 2010.

A source close to the Al Gosaibi family, speaking before the Bahrain action was announced, said: “The feeling was more positive this time. At least nothing was thrown at us today.”

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