Bloomberg/Dubai
The Saad Group and Ahmad Hamad Algosaibi & Bros Co., the Saudi Arabian family businesses that defaulted on payments, owe $2.9bn to banks in the UAE, the central bank said.
Banks must make provisions for those loans by December 31, the Abu-Dhabi-based central bank said in an e-mailed statement yesterday.
The lenders may be required to make additional provisions next year, it said. Thirteen local banks and seven foreign banks operating in the UAE are affected, the central bank said.
The companies are involved in legal battles after both businesses defaulted on their Bahrain-based banking units and the Algosaibi family accused the founder of Saad Group, Maan al-Sanea of siphoning funds for personal use, a charge denied by al-Sanea.
Units of the Al-Khobar, Saudi Arabia-based companies borrowed at least $15.7bn from more than 80 regional and international banks, according to documents provided by lenders.
“The figure isn’t too shocking in my opinion compared to the real estate potential for non-performing loans,” Yazan Abdeen, fund manager at ING Investment Management Dubai Ltd said by e-mail.
“The issue of provisioning is wider than just Algosaibi and Saad Group. UAE banks are not taking enough provisions, and I expect to see far more provisioning going into 2010.”
The international banks that lent to the companies include Paris-based BNP Paribas SA, New York-based Citigroup Inc. and Arab Bank Plc in Amman, Jordan, according to the documents.
The UAE’s third-largest bank by assets, Abu Dhabi Commercial Bank PJSC, is owed a combined 2.24bn dirhams ($610mn) by the two groups, according to the prospectus for the bank’s global medium-term notes.
Mashreqbank PSC, the nation’s third-biggest bank by revenue, said on September 16 it’s owed about $400mn by Ahmad Hamad Algosaibi & Brothers Co.
An Abu Dhabi court ordered a freeze on deposits and assets of two units of Saad Group in the United Arab Emirates, acting upon a request of a local bank that claims it is owed $151mn by the Saudi Arabian group, state-run Wam news agency reported on November 12.
The court asked the Central Bank to take measures to implement the order, the news service said yesterday, without naming the bank that filed the complaint against Saad Trading, Contracting and Financial Services Co. and Saad Holding Co.
Mashreqbank PSC, the UAE-based lender owned by billionaire Abdul Aziz al-Ghurair, said on November 15 it received “no settlement offer” from Saad Group or Algosaibi group.
The bank is suing Algosaibi in New York and the UAE over failed foreign currency transactions.
Chief executive officer Al- Ghurair said on November 2 that the bank may hold talks to reach a settlement with the Algosaibi group.
UAE banks made provisions of 29bn dirhams ($7.9bn) for non-performing loans in October, a 53% increase from a year ago, according to the Central Bank.