Saad's sukuk investors mull setting up committee

* Document sent to large number of banks

* Investors met twice at Norton Rose London office

* Not clear whether November instalment will be paid

By Cecilia Valente and Frederik Richter

LONDON/MANAMA, July 14 (Reuters) - Investors in a $650 million Islamic bond issued by troubled Saudi conglomerate Saad [SAADG.UL] plan to set up a committee to represent them at creditor meetings, a draft resolution obtained by Reuters showed.

The resolution stipulates the committee will hold talks with sukuk trustees Citicorp Trustee Company Ltd, and "any other relevant party".

The document, drawn up by law firm Mayer Brown International LLP was emailed to a large number of banks and fund managers, but it was not clear whether all of them were bondholders.

Investors in the Islamic bond Golden Belt 1 Sukuk have taken part so far in two meetings at the London office of legal firm Norton Rose to discuss the sukuk, or Islamic bond, a source familiar with the situation told Reuters.

It is common practice for bondholders to set up a committee to defend their positions ahead of a debt restructuring.

Norton Rose declined to comment.

Regulators and bankers alike are grappling with the fall-out from debt restructuring at Saad Group and a second conglomerate, Ahmad Hamad Algosaibi and Brothers (AHAB), the biggest blow yet to hit the Gulf Arab region since the start of the financial crisis.

Numerous Gulf Arab banks have said they face potential writedowns on loans made to the groups, and HSBC has estimated the lending exposure of Saudi banks alone at $4-$7 billion [ID:nL8448580].

The Saad sukuk is scheduled to mature in 2012, paying coupons twice a year. The May 2009 coupon has already been paid, but it is not clear whether the November coupon will be paid as scheduled, a second source said.

Yields on the sukuk rose sharply to about 27 percent from around 12 percent within ten days in March, and jumped from that level to above 70 percent in mid-June, according to Thomson Reuters data, as investors feared a default.

Two of the banks who received the resolution -- London-based Islamic bank European Islamic Investment Bank (EIIB), Goldman Sachs and the Dubai Bank -- would not comment.

None of the other banks replied to a request for comment. They include Malaysian banks CIMB, Arab-Malaysian Banking Group (AMBG), Goldman Sachs (GS.N) and BlackRock Inc (BLK.N).

German co-operative bank DZ Bank, asset manager Finisterre Capital and Bank of Montreal (BMO.TO) (BOM) are also on the list, as are National Bank of Abu Dhabi NBAD.AD, Abu Dhabi Islamic Bank (ADIB), Arab Banking Corporation ABCB.BH, Credit Agricole Asset Management Saudi Fransi and the United Arab Emirates' Mashreq Bank MASB.DU. (For the Hedge Hub blog, visit: blogs.reuters.com/hedgehub/ For the Global Investing blog, visit: here) (Editing by Dan Lalor)