March 21, 2018 / 11:34 AM / 7 months ago

Formerly detained Saudi businessmen Alwaleed and Alhokair in talks for loans

DUBAI, March 21 (Reuters) - Two businessmen formerly detained a part of Saudi Arabia’s anti-corruption campaign are now in talks with banks for loans for their firms in excess of $3 billion, sources said, suggesting that bank markets are open again for those who have reached financial settlements with the government.

Saudi Prince Alwaleed bin Talal’s investment firm Kingdom Holding is in talks for a loan worth up to $1 billion, while Saudi fashion retailer Fawaz Abdulaziz Alhokair, whose major shareholder Fawaz Alhokair was also detained, is in discussions with banks for a loan of around 8 billion riyals ($2.13 billion).

Local banks are expected to provide most of the debt, while international banks appear to be more cautious given the lack of clarity over the terms of settlements the business figures reached with the Saudi authorities, banking sources said.

Alhokair was not immediately available for comment, while Kingdom Holding confirmed in an email to Reuters that it has started talks again with local and international banks in order to raise up to $1 billion.

Saudi Arabia’s Crown Prince Mohammed bin Salman launched a sweeping anti-graft crackdown last November, arresting dozens of princes, senior officials and top businessmen accused of crimes such as money laundering, bribing and extorting officials.

Saudi officials said earlier this year that several detained businessmen had reached financial settlements with the government amounting to over $100 billion in total. Among them were prince Alwaleed – Saudi Arabia’s most prominent business figure – and Fawaz Alhokair, released from detention at the end of January.

Prince Alwaleed confirmed to Bloomberg TV this week that he had reached an agreement with the government although he did not disclose any details, saying the agreement was “confidential and secret.”

No details of the financial settlement reached by Fawaz Abdulaziz Alhokair has been made public either, bankers said. According to one banking source familiar with the matter, the settlement could involve Alhokhair’s personal wealth, rather than shares in his company.

Kingdom Holding’s plans to borrow funds for new investments stalled last November when the prince was detained, several sources told Reuters at the time, indicating that the crackdown had slowed down new Saudi business activity.

Discussions on the 8 billion riyals loan for the retailer Alhokair had also started before the anti-graft campaign, but the financing was held up when Fawaz was detained.

The loan is now about to be completed. It will be used to refinance existing debt and will be provided by a group of local banks including Al Rajhi Bank and Samba Financial Group, sources said.

Kingdom Holding is working with a group of banks including Arab National Bank and Samba Financial Group for the new financing, which would be backed by the company’s shares in Banque Saudi Fransi, sources said. Prince Alwaleed told Bloomberg TV earlier this week that he was “on the verge” of obtaining debt facilities worth $1 billion and $2 billion.

He also said Kingdom Holding was planning to split its $13 billion of assets by spinning off its domestic property and other holdings.

None of the banks responded to a request for comment.

The planned loan has no recourse to Kingdom Holding itself. “Ultimately the financing was never dependent on the credit worthiness of Alwaleed himself, the loan was always going to be secured against the shares in Saudi Fransi and probably some top-up shares in Citigroup. But with him in detention, banks put everything on hold, obviously,” one source said.

Alwaleed is a longstanding major shareholder in Citigroup.

Two bankers working in the region at international banks said, however, that too many questions have remained unanswered regarding Prince Alwaleed’s release and his financial settlement, and that international lenders are likely to be more cautious than their local counterparts in dealing with Kingdom Holding.

“Further clarity is still required about the future. The only thing I know is that they might split the assets into two. That’s not enough information to convince me to lend,” one of them said. ($1 = 3.7498 riyals) (Editing by Peter Graff)

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