Saudi Oger seeks pay­ment freeze on $3.5bn bank debt

Kuwait Times - - BUSINESS -

Con­struc­tion giant Saudi Oger has asked banks to agree to a freeze in re­pay­ments on at least 13 bil­lion riyals ($3.5 bil­lion) of debt, sources aware of the mat­ter said, as it seeks more time to col­lect money owed by the king­dom’s gov­ern­ment. The re­quest opens the way for the com­pany, owned by the fam­ily of Le­banese Prime Min­is­ter-des­ig­nate Saad Al-Hariri, to press ahead with seek­ing one of the largest debt re­struc­tur­ing deals in the Gulf since the slide in oil prices in June 2014.

A stand­still agree­ment al­lows trou­bled com­pa­nies to sus­pend pay­ments to cred­i­tors and halts any at­tempts to pur­sue le­gal ac­tion for re­im­burse­ment, giv­ing them breathing space to reach a re­struc­tur­ing deal. It was not clear whether the re­quest, sub­mit­ted to banks in the king­dom late last month, ex­tended to the con­glom­er­ate’s bank debt out­side the king­dom as well, or how long a freeze on debt re­pay­ments would last.

A Saudi Oger spokesman did not re­spond to an emailed re­quest for com­ment. “Saudi Oger has asked banks for a stand­still while they col­lect money from the gov­ern­ment,” one source said.

An­other source said a stand­still agree­ment was a first step “but the com­pany will need some form of help from the gov­ern­ment for there to be a res­o­lu­tion.” Saudi Oger is a mega-con­trac­tor that for years built grand in­fra­struc­ture projects in the king­dom, from univer­si­ties and roads to air­ports and hos­pi­tals.

But the col­lapse in oil prices has prompted the gov­ern­ment to tighten spend­ing, hurt­ing con­trac­tors such as Oger that rely on the state for most of their projects. The gov­ern­ment owes Oger about 30 bil­lion riyals for work it has com­pleted, a Saudi-based source with knowl­edge of the mat­ter told Reuters in Sep­tem­ber. It is un­clear how much of that amount re­mains out­stand­ing.

One an­a­lyst es­ti­mated un­paid dues to the con­struc­tion sec­tor as a whole to­talled 80 bil­lion riyals. Hopes of the pay­ment back­log eas­ing rose af­ter the king­dom’s state news agency said on Mon­day that the gov­ern­ment had dis­cussed set­tling pay­ments to the pri­vate sec­tor be­fore the end of the year.

The sources said it was too early to say whether banks would agree to the stand­still re­quest. Any fail­ure of the com­pany would send rip­ples across the Saudi bank­ing sys­tem and wider econ­omy. Oger’s debt to lo­cal banks was es­ti­mated at 13 bil­lion riyals, of which 7 bil­lion riyals was al­ready com­mit­ted and a fur­ther 6 bil­lion riyals con­sisted of credit that was al­lo­cated but was cur­rently un­drawn, one of the sources said.

That 13 bil­lion riyals is higher than the 10 bil­lion riyals in com­bined profit re­ported by all Saudi banks dur­ing the third quarter. A debt re­struc­tur­ing ap­peared a more likely prospect af­ter the gov­ern­ment ended talks aimed at sav­ing the com­pany, Reuters re­ported in Sep­tem­ber.

In other signs of pres­sure on the Oger busi­ness em­pire, Saudi Oger has be­gun talks with po­ten­tial buy­ers of its 20.93 per­cent stake in Jor­dan-based Arab Bank, while Oger Tele­com is in talks about a po­ten­tial stake sale with Saudi Tele­com, Reuters pre­vi­ously re­ported, cit­ing sources.

Oger Tele­com is also in talks with cred­i­tors to rene­go­ti­ate debt be­fore its next re­pay­ment on a $4.75 bil­lion loan in March, ac­cord­ing to sources. — Reuters

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