DUBAI / RIYAD, March 13 (Reuters) – Saudi conglomerate Ahmad Hamad Algosaibi and Brothers (AHAB) on Wednesday announced that it has filed for financial restructuring under Saudi’s new bankruptcy law as it seeks to end to a ten-year dispute with creditors.
Saudi bankruptcy law, which came into effect in August, is an important step in making the kingdom more investor-friendly, providing a legal framework for struggling companies looking to restructure their debt in the wake of the 2009 global financial crisis. and, more recently, the drop in oil prices.
Creditors are suing AHAB and Saad Group, another Saudi conglomerate, since they defaulted on around $ 22 billion in combined debt in 2009.
Before the law was introduced, modern bankruptcy law did not exist in Saudi Arabia, meaning the main options for default were liquidation or cash injections.
AHAB’s earlier request for “out-of-court settlement”, the first by a leading company under the new law, was dismissed by a Dammam commercial court which said it had not provided all the required details.
Simon Charlton, director of restructuring for AHAB, said the company has appealed the rejection and is waiting to hear the court, but has in the meantime decided to file a financial restructuring petition.
“AHAB believes that it is in the best interests of its creditors and AHAB partners that this matter be resolved properly under the new bankruptcy law rather than being dealt with by the enforcement court and has therefore decided to file this petition, “Charlton told Reuters.
Dammam’s commercial court last month approved a request by indebted billionaire Maan al-Sanea and Saad, after filing a request for financial reorganization.
Charlton said AHAB’s financial restructuring request is more likely to be successful because it does not require a classification of creditors or a proposed settlement.
Government efforts to unravel AHAB and Saad debt disputes have intensified since 2016, when it formed a joint three-judge execution directorate at the Al Khobar Tribunal (JDEK) . The court dealt with creditors’ claims against AHAB and initiated liquidation proceedings for the Saad group.
AHAB attempted to transfer jurisdiction over its case from JDEK to Dammam Commercial Court, under bankruptcy law, to avoid the risk of a disorganized liquidation. (Report by Davide Barbuscia and Marwa Rashad, edited by Alexander Smith)