Societe Generale, one of France's largest banks, has filed a lawsuit in London against the Saad Group over a US$50 million (Dh183.6m) loan default. The bank lodged its complaint in London's High Court last month, accusing a unit of the Saudi family-run business of failing to pay back a $50m loan agreed in February and guaranteed by Maan al Sanea, Saad Group's owner.
The case is the latest chapter in a string of legal actions in the US and UK targeting the Saad Group and Ahmad Hamad Al Gosaibi and Brothers, another struggling Saudi conglomerate. Both firms are meeting with creditors as they try to restructure debt and emerge from what the Saad Group has termed a "short-term liquidity squeeze". Meanwhile, the Al Gosaibi group has accused Mr al Sanea of causing the problems at both firms by masterminding a $10 billion fraud stretching over decades.
Al Gosaibi alleges that Mr al Sanea forged documents to take out loans in the company's name when he headed up its financial services arm, called the Money Exchange, between 1981 and this year. He then diverted the funds into his own accounts and the accounts of companies he controlled, Al Gosaibi contends. The Saad and Al Gosaibi groups started to default on financial obligations in April and May, triggering a series of lawsuits as banks moved to collect what they were owed through the courts.
The Dubai-based Mashreqbank and Deutsche Bank sued Al Gosaibi and the International Banking Corporation, a Bahraini subsidiary, in New York. Germany's Commerzbank has also filed suit against the firm in London. And cases against the Saad Group are pending in the Cayman Islands, where a judge has ordered a freeze on $9.2bn of Mr al Sanea's assets held in offshore accounts and companies. The Societe Generale suit demands $50m, plus lawyers' fees and a commission, according to a Bloomberg report.
A spokesman for the Saad Group in London declined to comment when contacted by Bloomberg. While the Saad and Al Gosaibi groups try to resolve legal difficulties with creditors and between each other, banks and other financial firms that have lent money to them are facing their own set of problems. Banks across the globe are estimated to be owed tens of billions of dollars by the conglomerates. And many have already set aside provisions to cushion against a rise in expected loan defaults, including on loans to Saad and Al Gosaibi.
Provisioning at listed banks in the UAE amounted to roughly $1.3bn in the first half of the year. Second-quarter profits at the country's banks slipped by 27 per cent compared with the same quarter last year. * With Bloomberg
