Sunday, Aug 09, 2009

(Adds comment.)

By Nour Malas

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Bahrain's central bank, which last week took control of two lenders owned by troubled Saudi conglomerates Saad Group and Al Gosaibi, has appointed law firms to administer the banks.

Trowers & Hamlins will lead the administration of The International Banking Corp., or TIBC, while Charles Russell LLP will administer Awal Bank, the central bank said in two separate statements on its Web site Sunday.

"Administration is both appropriate and cost effective given the number of legal cases" each bank "is already a party or is likely to be a party" to, the central bank said.

The appointment of the two law firms is the latest twist in the financial struggle that has engulfed the owners of both banks. TIBC is owned by Saudi conglomerate Ahmad Hamad Al Gosaibi Bros. & Co., or AHAB, while Awal Bank is owned by Saudi billionaire Maan Al Sanea and two of his companies, including the Saad Group.

The conglomerates, linked through marriage, began to face scrutiny in May after they failed to repay some debts. The Grand Court of the Cayman Islands has ordered a worldwide freeze of $9.2 billion in assets belonging to Al Sanea, who is also being sued in the U.S. by AHAB, according to court documents seen by Zawya Dow Jones.

"The new administrator will assist all interested parties facilitate a resolution," an AHAB spokesperson said in a statement to Zawya Dow Jones, adding that the group's commercial businesses remain unaffected.

Representatives for Saad Group and either bank were unreachable for comment. 


 
   DEFAULT

Bahrain's central bank said it took control of TIBC and Awal Bank after an investigators' report it had commissioned found they had a substantial shortfall of assets compared to liabilities.

The regulator then said it would instruct an external administrator to identify the outstanding claims of creditors and develop proposals towards settling those claims. It also said it was "reviewing the actions of certain persons connected with the management of the banks."

Bahrain's central bank governor told Al Arabiya television Thursday that the effects of the two banks' debt problems on the country's banking sector were "very limited," and that some executives from both banks were under investigation.

Standard & Poor's Ratings Services Tuesday downgraded TIBC to 'D/D', or default, from 'SD/SD', or selective default, after the central bank's announcement that it would appoint an administrator for the lender. S&P had downgraded TIBC to selective default in May after the bank defaulted on some of its debt.

-By Nour Malas, Dow Jones Newswires, +9714 374 8044; nour.malas@dowjones.com

Copyright (c) 2009 Dow Jones & Co.

(END) Dow Jones Newswires

09-08-09 1316GMT