Saudi Arabia’s Algosaibi Said to Owe $9.2 Billion

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June 26 (Bloomberg) -- Ahmad Hamad Algosaibi & Brothers Co., the Saudi family holding company whose Bahraini bank has defaulted, owes 34.6 billion Saudi riyals ($9.2 billion) to more than 100 banks, two people familiar with the situation said.

The Algosaibi group held a meeting with creditors in Bahrain June 24 to ask for a grace period of 90 days to investigate the debt, said one person involved in the talks, who declined to be identified because the information is confidential. A spokesman for the company, which bottles Pepsi Cola in Saudi Arabia and holds stakes in lenders including Saudi British Bank, had no immediate comment when contacted by Bloomberg News.

The size of Algosaibi’s liabilities “strikes the markets as a surprise,” said Luis Costa, an emerging-markets debt strategist at Commerzbank AG in London. “This is a problem when it comes to buying anything originated from the Middle East, how to properly measure the leverage of players there.”

Algosaibi said June 11 it had discovered “substantial irregularities” within its financial services arm after The International Banking Corporation BSC in Bahrain defaulted on debt. An Algosaibi spokesman said last month that Maan al-Sanea, the Saudi billionaire who owns a stake in HSBC Holdings Plc, managed TIBC. A spokesman for Saad Group, al-Sanea’s holding company, denied he had a management role at the bank.

The Saudi Arabian Monetary Agency on May 28 froze the accounts of al-Sanea, according to a person who read the central bank’s circular. Five days later, Saad Group, which is based in Al-Khobar in Saudi Arabia’s Eastern province, said it was restructuring debt because of “a short-term liquidity squeeze.”

Ratings Downgrade

Moody’s downgraded Saad by five levels to below investment grade before withdrawing the rating because of a lack of “adequate” information about the company’s finances.

Al-Sanea, who married into the Algosaibi family, ranked No. 62 among the world’s richest people by Forbes in March, with an estimated net worth of $7 billion.

Algosaibi is setting up steering groups for each of its four financial divisions to figure out how to repay debt.

Banks that provided at least $64 billion to Saudi borrowers in the past five years as record oil prices spurred economic growth for the world’s biggest crude exporter now risk losses because the country’s first recession in a decade is threatening the wealth of some of the most powerful families.

BNP, Citigroup

International banks hold 30 percent of the debt of Algosaibi’s four financial divisions, TIBC, Saudi Arabia-based Money Exchange, Bermuda-based Algosaibi Trading Services, and Bahrain-based Algosaibi Investment Holding, according to the two people, who are involved in the talks to restructure the debt. Another 30 percent is owed to Saudi-based banks and the remaining 40 percent to banks from the other five members of the Gulf Cooperation Council.

Algosaibi borrowed $700 million in May 2007 through a three-year loan arranged by banks including Abu Dhabi Commercial Bank, Arab Bank Plc, BNP Paribas SA, Lloyds Bank Plc, Mashreq Bank, NBD Bank NA, Qatar National Bank and WestLB AG, according to data compiled by Bloomberg.

BNP Paribas and Citigroup Inc. provided about $500 million each in syndicated loans to companies owned by al-Sanea and the Algosaibi family, according to a document obtained by Bloomberg News. The banks top a list of 37 creditors that provided $5.6 billion in syndicated loans to units of Saad Group.

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