DUBAI: A Saudi commercial court has accepted a filing by conglomerate AHAB to have its decade-long dispute with creditors resolved under the kingdom's new bankruptcy law, and rejected a demand to liquidate the company filed by two of its creditors, sources familiar with the matter said.
The bankruptcy filing was seen as a key test of Saudi Arabia's new law for handling insolvency disputes, which became effective last year as part of reforms aimed at making the country more investor friendly.
Following an appeal, the Dammam Commercial Court earlier this week reconsidered its previous rejection of AHAB's (Ahmad Hamad Algosaibi and Brothers) filing for a financial restructuring procedure and approved it, the sources said.
The financial restructuring is one of the procedures envisaged by the bankruptcy law introduced last year.
The court also rejected a parallel application for liquidation of AHAB which was filed by two of its creditors, HSBC HSBA.L and Raiffeisen Bank RBIV.VI , the sources said.
AHAB and HSBC declined to comment, while Raiffeisen Bank did not respond to a request for comment.
Creditors have been pursuing AHAB and Saad Group, another Saudi conglomerate, since they defaulted on about $22 billion in combined debt in 2009.
AHAB wanted to move the jurisdiction of its case under the bankruptcy law to avoid the risk of a disorganised liquidation.
Earlier this year it applied for a "protective settlement procedure" under the law. After that was rejected, it applied for the financial restructuring procedure.
The court is now expected to appoint a bankruptcy trustee who will collect and assess creditors' claims.
The International Bank Corporation (TIBC), a defaulted Bahraini bank which has nearly $3 billion in claims against AHAB, welcomed the court's decision to accept financial restructuring, saying this would provide clarity going forward.
"The appointed independent trustee may recognise the cost implications of continued legal challenges against TIBC's claims ... and review our claims objectively," a TIBC spokesman told Reuters.
TIBC, now administered by Bahrain's central bank, raised money in international markets, transferring the funds to AHAB in what a Cayman Islands court last year called one of the largest Ponzi schemes in history.
AHAB, which denies knowledge of the scheme, collapsed after TIBC defaulted on a foreign exchange deal with Deutsche Bank in 2009.
(Reporting by Davide Barbuscia; editing by David Evans) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: firstname.lastname@example.org))