June 1, 2009 / 10:24 PM / 10 years ago

UPDATE 4-Saudi Saad group says to restructure debt

(Adds Moody’s downgrade)

By Souhail Karam

RIYADH, June 1 (Reuters) - Private Saudi company Saad Group said on Monday it plans to restructure the debt of units hurt by a liquidity squeeze brought on by the global financial crisis, as ratings agency Moody’s cut its ratings on the group to junk.

The restructuring and the downgrade will rattle a $30 billion empire built by the powerful Saudi businessman Maan al-Sanea, chairman of the Saad Group. Saudi bankers say Saad Group’s accounts have been frozen by the Saudi central bank.

The Saudi Arabian Monetary Agency (SAMA) issued two circulars telling Saudi banks to freeze Sanea’s accounts, three Saudi-based banking sources said on condition of anonymity.

“The events of the past few days have resulted in heightened risk of default at entities of the Saad Group, if they face increased contagion from disputes originating from the shareholder,” Moody’s said in a statement with the downgrade.

Saad Group [SAADG.UL] did not cite its chairman in a statement announcing the restructuring, but said “accounts of our operating companies remain unimpaired.”

The group did not disclose the size of the debt restructuring or the number of the companies affected, saying only it was facing short-term liquidity problems from global turmoil and unspecified “events” affecting the Bahraini banking sector, where it is active through two banks. (For the text of the statement double click on [ID:nL1208305])

“We are continuously striving to mitigate the effects of this limited squeeze and are also planning for an orderly restructuring of the debt of affected companies in cooperation with our counterparties and international advisers,” said the firm, one of Saudi’s top family conglomerates.

Saad Group said it appointed consultants and was also about to conclude a deal with an unnamed top European bank to manage relations with other lenders.

The accounts freeze could reverberate throughout the region since Sanea and the companies he controls form a key part of the closely knit commercial world of the Arabian peninsula. Several of those companies have suffered setbacks in recent weeks.

Sanea owns Bahrain-based Awal Bank, either directly or through Saad Group, according to the bank’s website.

Moody’s said it downgraded a number entities related to Saad Group, including Saad Trading Contracting & Financial Services Co, Saad Investments Co Ltd and Saad Group Ltd, to B1 — termed “high-yield” or “junk” by market participants — and more downgrades could come.

Saadgroup Ltd, based in the Cayman Islands, had total assets of $30.6 billion at year-end 2008, Moody’s said.

GOSAIBI FAMILY TIES

Sanea made international headlines in 2007 when he spent 3.3 billion pounds ($5.29 billion) to buy a 3.1 percent stake in HSBC Holdings Plc (HSBA.L). In 2008, Forbes magazine estimated his wealth at $8.1 billion.

Saad Group attributed its financial woes mainly to “the failure of companies owned by a prominent family business and the unexpected and unprecedented regional reaction to that failure.”

It did not name the family business in question.

It also cited “considerable payments by (Saad) Group companies against facilities that, in the past, would have been rolled over or increased.”

Sanea is married to a niece of Sulaiman Hamad al-Gosaibi, the recently deceased chairman of the Ahmad Hamad Al Gosaibi and Brothers Group (AHAB), the bankers said. AHAB is a controlling shareholder in Bahrain’s The International Banking Corp (TIBC), which suffered a setback in May when ratings agency S&P lowered its rating to “selective default.”

One banker, who spoke on condition of anonymity, said the freeze would protect collateral owned by Sanea that may be claimed by borrowers.

“For SAMA, it was about defending the reputation of the kingdom, its credit-worthiness,” he said.

S&P said last week it was considering lowering its ratings on Saad Group due to reduced liquidity and real estate exposure. [ID:nSPWeVADta]

Additional reporting by Ulf Laessing in Riyadh, Frederick Richter in Manama, and Thomas Atkins in Dubai; Editing by Steve Orlofsky and Andre Grenon

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