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Saad sukuk investors to set up committee

Riyadh, July 14, 2009

Investors in a $650 million Islamic bond issued by troubled Saudi conglomerate Saad plan to set up a committee to represent them at creditor meetings, a draft resolution obtained by Reuters showed.

The resolution stipulates the committee will hold talks with sukuk trustees Citicorp Trustee Company Ltd, and 'any other relevant party'.

The document, drawn up by law firm Mayer Brown International LLP was emailed to a large number of banks and fund managers, but it was not clear whether all of them were bondholders.

Investors in the Islamic bond Golden Belt 1 Sukuk have taken part so far in two meetings at the London office of legal firm Norton Rose to discuss the sukuk, or Islamic bond, a source familiar with the situation told Reuters.

It is common practice for bondholders to set up a committee to defend their positions ahead of a debt restructuring. Norton Rose declined to comment.

Regulators and bankers alike are grappling with the fall-out from debt restructuring at Saad Group and a second conglomerate, Ahmad Hamad Algosaibi and Brothers (AHAB), the biggest blow yet to hit the Gulf Arab region since the start of the financial crisis.

Numerous Gulf Arab banks have said they face potential writedowns on loans made to the groups, and HSBC has estimated the lending exposure of Saudi banks alone at $4-$7 billion.

The Saad sukuk is scheduled to mature in 2012, paying coupons twice a year. The May 2009 coupon has already been paid, but it is not clear whether the November coupon will be paid as scheduled, a second source said.

Yields on the sukuk rose sharply to about 27 per cent from around 12 per cent within ten days in March, and jumped from that level to above 70 per cent in mid-June, according to Thomson Reuters data, as investors feared a default.

Two of the banks who received the resolution -- London-based Islamic bank European Islamic Investment Bank (EIIB), Goldman Sachs and the Dubai Bank - would not comment.

None of the other banks replied to a request for comment. They include Malaysian banks CIMB, Arab-Malaysian Banking Group (AMBG), Goldman Sachs and BlackRock.-Reuters




Tags: sukuk | committee | Saad |

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