Al Gosaibi prepared to sell assets to pay debt

$9bn repayment plan relies in part on money expected from lawsuits against Saad Group

The al Gosaibi family of Saudi Arabia is prepared to sell much of its 70-year-old business empire to help pay its creditors, informed sources say. The family behind Ahmad Hamad Al Gosaibi and Brothers is offering creditors 20 cents on the dollar on US$9 billion (Dh33.05bn) of liabilities, funded by a disposal of assets, plus any proceeds of the family's lawsuits against Maan al Sanea, a businessman and relative by marriage whom they accuse of defrauding the Al Gosaibi business. Mr al Sanea, the head of the Saad Group, has denied the allegations.

The Al Gosaibi conglomerate has extensive interests in construction and property, shipping, paint manufacture and beverage bottling. It owes $9bn to international and local banks. The repayment plan will be considered formally by bankers, who have already been given the broad outline, at a meeting in Dubai this week, the sources said. As part of the settlement proposal the banks are considering, the Al Gosaibi business is recommending a cash payment of about $1.8bn to be funded by the asset disposal programme.

It is also proposing to return a further $4bn to creditors from the proceeds of the legal actions it has brought against Mr al Sanea in New York, London, the Cayman Islands and the Gulf. In the Cayman Islands, Mr al Sanea's assets and those of the Saad Group in that jurisdiction have been frozen by a Caymanian court. As part of its proposal, Al Gosaibi is pledging to keep up the legal pressure on Mr al Sanea through the establishment of a "fighting fund" of $135 million to cover the costs of continuing legal action around the world, the sources said.

A co-ordinating committee of Al Gosaibi's creditor banks includes WestLB, Standard Chartered, Emirates NBD, Abu Dhabi Commercial Bank and Dubai Bank. One banker, who asked to remain anonymous, said: "We are considering the proposals, but our first reaction is that it is not enough. It's hard to quantify how much might be recoverable from the Saad assets." One function of the committee this week will be to assess a legal report on the status of the various actions brought by Al Gosaibi and their chances of recovering assets.

The international accounting firm Grant Thornton last year unearthed $6.2bn of assets in Mr al Sanea's Caymanian holding company, Saad Investment. But these were partly offset by liabilities - mainly unpaid corporate loans and bank debt - which reduced the net assets to $2.2bn. Grant Thornton said: "Material uncertainty exists surrounding the realisable value of most of [Saad Investment Company Ltd's] assets. It is therefore extremely difficult for [us] to form a realistic view at this time as to the extent of the assets which will be available to meet the claims of creditors."

Mr Al Sanea's main assets are held in Saudi Arabia as part of his property, construction and trading conglomerate. A spokesman for Al Gosaibi declined to comment on the details of the proposal. "We continue to work with the banks to find a resolution ? and our conversations with them are confidential," said Jim Courtovich of the Washington-based lobbying firm Sphere Consulting. The Al Gosaibi business dynasty was founded in the 1940s by Hamad al Gosaibi and his three sons Ahmad, Abdulaziz and Sulaiman, as a services company for the oil business, but later expanded into property, construction, logistics and industry. In the 1950s it built the first Saudi plant for the bottling of Pepsi soft drinks. It has since diversified into hotels, food processing and finance.

Problems at the family's banking business in Bahrain, The International Banking Corporation, raised the first doubts about the conglomerate's financial health in May last year and sparked the confrontation with Mr al Sanea. The Al Gosaibi conglomerate is owned by 20 family partners and run by Saud al Gosaibi, its president and managing director. Most of its businesses are in Saudi Arabia, but it also has interests in other parts of the Middle East, including an industrial company, Crown Emirates, in the UAE and a packaging plant in Tunisia.

The confrontation between Al Gosaibi and Mr al Sanea has been monitored by a special committee of the Saudi government. [e-mail]