Saudi Oger has begun talks with potential buyers for its 20.93 percent stake in Arab Bank in a deal that could raise about $1 billion for the embattled construction giant, sources aware of the matter told Reuters.
Oger was one of two large Saudi contractors charged with implementing the kingdom's grand infrastructure plans before the fall in oil prices and consequent state spending cuts left the company facing a multibillion-dollar debt restructuring to stave off collapse.
A small number of potential buyers from Saudi Arabia and the wider Middle East have started negotiations, five sources said on condition of anonymity because the information had not been made public.
A spokesman for Saudi Oger, which is owned by the family of former Lebanese Prime Minister Saad Hariri, did not respond to requests for comment. Hariri's political offices in Beirut said it was a matter on which only Saudi Oger could comment.
Among the interested parties vying for the Arab Bank stake is Saudi Arabia's al-Hokair family, two Gulf-based sources said.
The family is best known for its Fawaz Al Hokair fashion retail business, the Middle Eastern franchisee for brands including Zara and Banana Republic, but also has interests in real estate and hospitality, as well as finance and investments through its FAS Capital arm.
Managing Director Abdulmagid al-Hokair did not respond immediately to calls and a text message.
One possible buyer has contacted banks about raising between $700 million and $1 billion to finance a bid, said one of the Gulf sources and two other sources. They declined to name the potential bidder.
A spokesman for Arab Bank, which has operations across the Middle East and a total of 600 branches on five continents, did not respond immediately to a request for comment.
DISTRESSED SELLER
Oger's stake is the largest single holding and would be worth about 815.4 million dinars ($1.15 billion) at Thursday's closing price, Reuters calculations show, though the second Gulf-based source said the final price is expected to be lower because of Oger's status as a distressed seller.
The proceeds would be a "drop in the ocean" in relation to Oger's debts, the fifth source said, though they could cover a $1.03 billion loan with regional and international banks that is due to mature in February.
Oger owes about 15 billion riyals ($4 billion) to banks, plus billions more to contractors, suppliers and employees, sources told Reuters last month.
The shares in Arab Bank are held as collateral for the loan maturing in February, meaning that the creditor banks would have had to give their approval to a sale. It is unclear whether the process was initiated by Oger to settle the loan or by the banks because of fears that the company could default.
Banks on the loan, including Deutsche Bank and Emirates NBD, have continued to receive interest from a cash pool set aside under the terms of the facility, a separate banking source said.
However, Oger Telecom, 55 percent owned by Saudi Oger, missed an interest payment on a $4.75 billion loan at the end of September, other banking sources told Reuters. One of the sources said the payment due was close to $300 million.
($1 = 3.7495 riyals)
($1 = 0.7078 Jordanian dinars)
REUTERS