Saudi court rejects AHAB bankruptcy filings after decade-long dispute

A Saudi court has rejected two applications from conglomerate Ahmad Hamad Algosaibi and Brothers (AHAB) to have its decade-long dispute with creditors resolved under the kingdom’s new bankruptcy law, AHAB said on Tuesday.

The case was seen as a key test of the kingdom’s new regime for handling insolvency disputes. Creditors have been pursuing AHAB and Saad Group, another Saudi conglomerate, since they defaulted on about $22bn in combined debt in 2009.

The company applied for a “protective settlement procedure” under Saudi Arabia’s new bankruptcy law earlier this year. After that was rejected, it applied for a financial restructuring procedure, another part of the country’s bankruptcy framework.

That application has now also been rejected, Simon Charlton, chief restructuring officer at AHAB, told Reuters.

“We understand it is a new law that is untried and untested and that everyone is learning, but … to be denied access to either process is damaging to the business, the employees who depend on it and importantly the creditors,” he said.

Saudi Arabia’s bankruptcy law, which came into effect in August, is an important step towards making the kingdom more investor-friendly.

Before the introduction of the law, modern bankruptcy legislation did not exist in Saudi Arabia, meaning the main options for defaults were liquidation or cash injections.

A commercial court in Dammam last month approved an application by detained and indebted billionaire Maan al-Sanea and his company Saad to have their case resolved through the bankruptcy law.

But the same court rejected AHAB’s application for two different procedures under the law.

AHAB will continue to petition the court for a settlement or restructuring process, Charlton said.

He added however that if it failed to make progress, the company “is looking at all other available jurisdictions where it might be able to apply for bankruptcy protection”.

It could even seek Chapter 11 bankruptcy protection in the United States, Charlton said.

Government efforts to solve the AHAB and Saad debt disputes have intensified since 2016, when the kingdom created a three-judge Joint Directorate of Enforcement at the General Court in Al Khobar (JDEK).

The court has handled creditor claims against AHAB and began a liquidation process for Saad Group.

AHAB has been trying to move the jurisdiction of its case from the JDEK to the Commercial Court in Dammam under the bankruptcy law, to avoid the risk of a disorganised liquidation.

The conglomerate was the first high-profile company to file for a settlement under Saudi Arabia’s bankruptcy law.

“To the best of our knowledge no protective settlement procedure has been accepted yet,” said Charlton.