02 July 2009
UAE banks have exposure of more than $3 billion (Dh11bn) through syndicated and bilateral transactions to the two embattled Saudi groups - Saad and Algosaibi - and their banking outfits, according to people involved in these deals.
The Saudi groups have raised finance through at least eight syndications in the past four years - three by Saad Group, two each by Awal Bank and Algosaibi Group and one by The International Banking Corporation (TIBC), they said. Other financial institutions with exposure through syndicated and bilateral financing deals include Arab and global lenders.
"I think many banks may not have bothered to verify their aggregate exposure built up to these groups over the past few years," said a banking analyst.
Though the exact level of the total exposure of about 150 financial institutions to these groups is yet to be known, Emirates Business has been able to discover the level of participation of some banks in the region through syndicated deals.
Sources said while Abu Dhabi Commercial Bank (ADCB) has participated to the extent of $395 million in the deal for Saad Group, its participation for Algosaibi Group was to the tune of $40m. In the case of Mashreq, these numbers add up to $160m and $50m, respectively. For Emirates NBD, participation in syndication was confined to a facility for Saad Group alone and the amount is learnt to be $100m.
First Gulf Bank (FGB) is also understood to have participated in the funding to both groups to the extent of $25m for Saad and $30m for Algosaibi. National Bank of Abu Dhabi, the largest Abu Dhabi-based bank, has advanced only $7m to the Saad Group through a syndicated facility.
The details of financing by other banks available with Emirates Business are as follows:
Arab Bank $395m (Saad) and $40m (Algosaibi); Citi $515m (Saad); Barclays $200m (Saad); JP Morgan $200m (Saad); Samba $300m (Saad); and Fortis $290m (Saad).
Banking sources said many banks have signed bilateral financing deals with these once cash rich groups far in excess of their participation in syndicated loans. Though the UAE Central Bank convened a meeting of the affected banks and offered to liaise with its counterpart in Saudi Arabia on the issue, very few banks have come forward with any statements referring to their exposure.
The head of International Banking with Mashreq, John Iossifidis, told the Dubai Financial Market through a statement: "Mashreq, along with a number of regional and international banks, is currently in discussions with some Saudi-based clients for a restructuring of their obligations. In the interests of client confidentiality, it is not possible to disclose further details at this stage."
Admitting that ADCB has exposure to these Saudi groups, the bank's general counsel and board secretary, in a letter to the Abu Dhabi Securities Exchange on June 25, noted that ADCB does not consider that this issue should raise significant concerns for investors, particularly in view of the facts that (a) the large percentage of these exposures is covered by cash collateral; ADCB holds other good security; (c) ADCB has taken high and prudent provisions against such losses; and (d) there is a low probability of complete loss.
Commenting on the collaterals some banks claim to hold against their exposure to the Saudi groups, an investment banker based in Dubai International Financial Centre said: "One has to really assess the present value of these securities before arriving at the 'net' exposure they are talking about."
Bank Dhofar, Oman's third-largest bank by market value, said it has an exposure of $10m to the Algosaibi Group.
The exposure relates to a $700m syndicated loan extended to Algosaibi in May 2007, the bank said in a statement to the Muscat bourse. Bank Dhofar does not have any exposure to the Saad Group.
UAE banks have exposure of more than $3 billion (Dh11bn) through syndicated and bilateral transactions to the two embattled Saudi groups - Saad and Algosaibi - and their banking outfits, according to people involved in these deals.
The Saudi groups have raised finance through at least eight syndications in the past four years - three by Saad Group, two each by Awal Bank and Algosaibi Group and one by The International Banking Corporation (TIBC), they said. Other financial institutions with exposure through syndicated and bilateral financing deals include Arab and global lenders.
"I think many banks may not have bothered to verify their aggregate exposure built up to these groups over the past few years," said a banking analyst.
Though the exact level of the total exposure of about 150 financial institutions to these groups is yet to be known, Emirates Business has been able to discover the level of participation of some banks in the region through syndicated deals.
Sources said while Abu Dhabi Commercial Bank (ADCB) has participated to the extent of $395 million in the deal for Saad Group, its participation for Algosaibi Group was to the tune of $40m. In the case of Mashreq, these numbers add up to $160m and $50m, respectively. For Emirates NBD, participation in syndication was confined to a facility for Saad Group alone and the amount is learnt to be $100m.
First Gulf Bank (FGB) is also understood to have participated in the funding to both groups to the extent of $25m for Saad and $30m for Algosaibi. National Bank of Abu Dhabi, the largest Abu Dhabi-based bank, has advanced only $7m to the Saad Group through a syndicated facility.
The details of financing by other banks available with Emirates Business are as follows:
Arab Bank $395m (Saad) and $40m (Algosaibi); Citi $515m (Saad); Barclays $200m (Saad); JP Morgan $200m (Saad); Samba $300m (Saad); and Fortis $290m (Saad).
Banking sources said many banks have signed bilateral financing deals with these once cash rich groups far in excess of their participation in syndicated loans. Though the UAE Central Bank convened a meeting of the affected banks and offered to liaise with its counterpart in Saudi Arabia on the issue, very few banks have come forward with any statements referring to their exposure.
The head of International Banking with Mashreq, John Iossifidis, told the Dubai Financial Market through a statement: "Mashreq, along with a number of regional and international banks, is currently in discussions with some Saudi-based clients for a restructuring of their obligations. In the interests of client confidentiality, it is not possible to disclose further details at this stage."
Admitting that ADCB has exposure to these Saudi groups, the bank's general counsel and board secretary, in a letter to the Abu Dhabi Securities Exchange on June 25, noted that ADCB does not consider that this issue should raise significant concerns for investors, particularly in view of the facts that (a) the large percentage of these exposures is covered by cash collateral; ADCB holds other good security; (c) ADCB has taken high and prudent provisions against such losses; and (d) there is a low probability of complete loss.
Commenting on the collaterals some banks claim to hold against their exposure to the Saudi groups, an investment banker based in Dubai International Financial Centre said: "One has to really assess the present value of these securities before arriving at the 'net' exposure they are talking about."
Bank Dhofar, Oman's third-largest bank by market value, said it has an exposure of $10m to the Algosaibi Group.
The exposure relates to a $700m syndicated loan extended to Algosaibi in May 2007, the bank said in a statement to the Muscat bourse. Bank Dhofar does not have any exposure to the Saad Group.
By CL Jose
© Emirates Business 24/7 2009
