The Saudi conglomerate owned by Maan Al-Sanea, one of Saudi Arabia’s most powerful businessmen, on Monday said it was planning an orderly restructuring of some its debts as the result of a liquidity squeeze.
The statement by Saad Group – its first admission that it is facing difficulties – came after bankers said the Saudi Arabian Monetary Agency (Sama) had frozen the personal accounts of Mr Sanea and members of his family.
Sama, the kingdom’s central bank, has not commented on its decision. A spokesman for Saad Group said it does not comment “on rumour or speculation”, but there has been no denial. The statement said the accounts of the group’s operating companies remain unimpaired.
The extremely rare action by Sama has rocked the kingdom’s financial community and raised concerns about Saad Group’s exposure to what is thought to be a long list of local, regional and international banks.
“Recent events, specifically affecting the Bahraini banking sector, have led to a short term liquidity squeeze affecting Saad Group companies in the Middle East,” Saad Group’s statement said. “We are continuously striving to mitigate the effects of the limited squeeze and are also planning for an orderly restructuring of the debt of affected companies in cooperation with our counterparties and international advisers.”
Two years ago, Mr Sanea, who set up Saad Group in the 1980s, bought 3 per cent of HSBC, and although his holding has fallen to less than 2 per cent since the beginning of the year he remains a top 10 shareholder in HSBC. His is also the largest shareholder after the government in Samba Financial Group, a leading Saudi institution, with 7.8 per cent holding in that bank, according to the Saudi stock market website.
The group said it was concluding arrangements with a leading European bank to “coordinate relationships with our international, regional and domestic counterparties to assure pari passu treatment”.
The situation resulted from a confluence of events, the statement said, including the failure of companies owned by a “prominent Saudi family business and the unexpected and unprecedented regional reaction to that failure, including some action by counterparties that is under review by our advisers”.
The statement did not name the company. But there has been much market speculation about whether there was any business relationship between Saad Group and Ahmad Hamad Algosaibi & Brothers Company.
The Algosaibi group is one of the oldest and most powerful family businesses in Saudi Arabia, but it shocked the financial community when one of its wholly owned subsidiaries – Bahrain-based The International Banking Corporation – defaulted on its debt last month.
Mr Sanea is married to a sister of a senior member of Algosaibi family.
But a spokesman for Saad Group told the Financial Times that Saad Group had no business ties with the Algosaibi group, “except on an arms’ length commercial basis”.
“Neither Maan Al-Sanea nor any related business entity is a partner or has any ownership interest whatsoever in AHAB or in any of its related entities (including TIBC),” the spokesman said. “Likewise, AHAB has no interest in Saad Group company or in any business owned or controlled by Maan Al-Sanea. Maan Al-Sanea is not involved in the operations of AHAB or its entity TIBC in anyway.”
The revelations about the two companies had raised questions about the state of some Gulf family businesses, which are notoriously secretive, and whether they over-extended during the oil boom, took on too much risk, and are now struggling to meet their obligations.
Standard & Poor’s, which rates Saad Group, said in a research note last week that despite net losses of about $4.4bn on financial investments, its overall asset base increased to $30.6bn by the end of 2008. Last year its reported real estate holdings nearly doubled, reaching $8.4bn, according to S&P. Saad companies include a Cayman Islands based subsidiary, Saad Investment Company Limited, which had assets of about $9bn at the end of last year, a Swiss registered service company, and Bahrain-based Awal Bank.
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