Saudi Oger seeks payment freeze on $3.5bn local bank debt – sources

Construction giant Saudi Oger has asked banks to agree to a freeze in repayments on at least SAR13bn ($3.5bn) of debt, sources aware of the matter said, as it seeks more time to collect money owed by the kingdom’s government.

The request opens the way for the company – owned by the family of Lebanese Prime Minister-designate Saad al-Hariri – to press ahead with seeking one of the largest debt restructuring deals in the Gulf since the slide in oil prices in June 2014.

A standstill agreement allows troubled companies to suspend payments to creditors and halts any attempts to pursue legal action for reimbursement, giving them breathing space to reach a restructuring deal.

It was not clear whether the request, submitted to banks in the kingdom late last month, extended to the conglomerate’s bank debt outside the kingdom as well, or how long a freeze on debt repayments would last.

A Saudi Oger spokesman did not respond to an emailed request for comment.

“Saudi Oger has asked banks for a standstill while they collect money from the government,” one source said.

Another source said a standstill agreement was a first step “but the company will need some form of help from the government for there to be a resolution.”

Saudi Oger is a mega-contractor that for years built grand infrastructure projects in the kingdom, from universities and roads to airports and hospitals.

But the collapse in oil prices has prompted the government to tighten spending, hurting contractors such as Oger that rely on the state for most of their projects.

The government owes Oger about SAR30bn for work it has completed, a Saudi-based source with knowledge of the matter told Reuters in September. It is unclear how much of that amount remains outstanding.

Payment backlog

One analyst estimated unpaid dues to the construction sector as a whole totalled SAR80bn.

Hopes of the payment backlog easing rose after the kingdom’s state news agency said on Monday that the government had discussed settling payments to the private sector before the end of the year.

The sources said it was too early to say whether banks would agree to the standstill request. Any failure of the company would send ripples across the Saudi banking system and wider economy.

Oger’s debt to local banks was estimated at SAR13bn, of which SAR7bn was already committed and a further SAR6bn consisted of credit that was allocated but was currently undrawn, one of the sources said.

That SAR13bn is higher than the SAR10bn in combined profit reported by all Saudi banks during the third quarter.

A debt restructuring appeared a more likely prospect after the government ended talks aimed at saving the company, Reuters reported in September.

In other signs of pressure on the Oger business empire, Saudi Oger has begun talks with potential buyers of its 20.93 per cent stake in Jordan-based Arab Bank, while Oger Telecom is in talks about a potential stake sale with Saudi Telecom, Reuters previously reported, citing sources.

Oger Telecom is also in talks with creditors to renegotiate debt before its next repayment on a $4.75bn loan in March, according to sources.