Middle East lending blow
Posted on » Tuesday, June 30, 2009
Posted on » Tuesday, June 30, 2009
| LONDON: The debt restructurings of privately-owned Saudi groups Saad and Al Gosaibi could curtail international lending to Saudi Arabia and the Middle East, banking sources said yesterday. The Saudi problems come after similar issues in Kuwait, and companies in the Gulf region may now face problems refinancing syndicated or bilateral loans, bankers say, as fears spread they are facing structural debt problems. "We wait to see the ramifications on Saudi and wider GCC private sector entities but clearly there will be a reluctance by international banks to support them in the immediate future," a Middle Eastern loan specialist said. The Saad and Al Gosaibi groups are restructuring debt of around $10 billion, according to reports that include loans of around $6.3bn.Saad's restructuring talks follow similar issues with other privately-owned Gulf investment firms. Kuwait's Global Investment House and Investment Dar are talking to creditors after defaulting on their debt. International banks cut lending to the region in August when the Gulf's real estate and equity markets slumped and lending to the Middle East showed a 75 per cent drop at the half year to $13.5bn, according to data. But the banks already have billions of exposure on their books to Gulf companies and regional banks through syndicated and bilateral loans that will need to be refinanced. Although privately-run companies are ostensibly separate from governments, the opaque and interconnected nature of private investment companies often extends into Gulf ruling families and the government, several bankers say. UAE banks have "significant" exposure to Saad and Al Gosaibi, the UAE central bank governor said yesterday. Speaking in the Swiss city of Basel, Sultan bin Nasser Al Suweidi said the Saudi central bank could not keep its freeze on accounts linked to the two firms forever and that Gulf countries must find a common and transparent solution to this issue as they are all affected."It's a big issue everywhere. All GCC countries are exposed. The UAE banks' exposure is significant," he said. Jordan's Arab Bank yesterday said it was exposed to Saad and Al Gosaibi groups but this would not affect its financial position. The bank said long-term loans were extended to the groups in exchange for "cash, real estate collateral, stocks and personal and institutional guarantees." |