A debt restructuring proposal designed to prevent the collapse of construction giant
Saudi Binladin Group may face more scrutiny from creditors.
The lenders that want a bigger say in the process have held discussions with
Rothschild & Co. and may decide to appoint the investment bank in the coming weeks, the people said, declining to be named because of the sensitivity of the matter.
Talks are ongoing, and no final decisions have been made, the people said. Creditors may also choose to hire another adviser or none at all, they said.
Read more: New Restructuring Era in Debt-Laden Gulf Sets Off Hiring Spree
While its not unusual for creditors to seek an independent counsel, they are acting almost a year after
Houlihan Lokey Inc. as an adviser for what would be one of the Middle Easts biggest debt revamps. The plan is a response to what banks deem to be the lack of transparency that surrounds the process and an approach by Houlihan that they fear will result in a one-sided deal, according to the people.
Houlihan has warned that it would consider resorting to Saudi bankruptcy regulations to overcome any dissent among lenders, they said.
Rothschild declined to comment. Houlihan declined to comment on the specifics of its presentation to lenders.
A spokesperson for Binladin said in a statement that positive discussions with creditors and lenders are advancing as part of the companys efforts to comprehensively recapitalize its balance sheet and improve operations.
Ongoing engagement with our stakeholder community is expected as we advance the company towards substantial market opportunities, the spokesperson said.
Binladin has been playing a key role in building most of Saudi Arabias infrastructure since the modern Saudi kingdom was founded in 1932.
But its fallen on hard times in recent years, accumulating massive losses and debts as it found itself out of favor with the government in the aftermath of a crane accident in Mecca in 2015. Lower oil prices further curbed the Saudi governments spending power, deepening Binladins troubles.
Read more: Binladin Group Barred From Saudi Projects After Deaths in Mecca
Binladin owes 32.9 billion riyals ($8.8 billion) to more than 50 banks, mostly Saudi and other Gulf lenders but also international heavyweights such as
BNP Paribas SA,
Deutsche Bank AG and
Standard Chartered Plc, according to documents reviewed by Bloomberg.
A rare public glimpse into the finances of the Middle Easts biggest construction group paints a complex picture of a company that has received billions in dollars in state support but at the same time is owed large amounts of money from the government for work thats already been carried out.
Although the companys performance has started to stabilize before the pandemic, its net losses in 2017-2019 reached a cumulative 17.5 billion riyals, one of the documents showed.
Houlihan is looking to secure support this month from banks and the Saudi Finance Ministry, in addition to setting up a call for all of the companys lenders.
Binladins restructuring adviser has warned in its presentations that a liquidation of the company would have a devastating impact on Saudi Arabias construction sector and the companys large workforce. It stated that suppliers, banks and the Saudi government — which owns roughly a third of the company — will all be hurt without creditors backing for the plan.
By hiring an independent adviser like Rothschild, lenders are angling for a better deal and would more likely speak with one voice when dealing with Binladin and its advisers, said the people. It would also ensure that they receive equal treatment and discourage different banks from striking separate deals with the company, they said.
Complicating the process, Binladins creditor group includes not only commercial banks that have extended roughly 200 different financing facilities, but also the Saudi government, trade creditors and various client liabilities.
A Binladin bankruptcy would send shockwaves through the Gulfs banking system and pose a serious setback to the kingdoms ambitious economic reforms, which rely on major local companies to deliver its most ambitious projects.
Adding another layer of complexity is Binladins part in developing the holy cities of Mecca and Medina, a key source of revenue for the Saudi rulers as a destination for millions of pilgrims each year before the global pandemic.
came onboard last year in an attempt to turn around the company and
transform it into a national champion that can support the Saudi crown princes goals.
The U.S. investment bank has submitted a debt proposal to lenders that gives not only an overview of Binladins financial challenges but also charts a possible path forward, allowing the company to turn around its fortunes within seven years and eventually enabling creditors to recoup some of their money, according to the documents.
The revamp plans success also hinges on Binladins progress in securing payments for past work. Its also counting on the companys ability to benefit from Saudi Arabias plans to pump spending into various mega-projects.
With assistance by Abeer Abu Omar
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