Poor enforcement

6 October 2009 By Una Galani Follow @ugalani

The troubled conglomerate is prioritising local creditors as it moves to settle a $20bn dispute. For foreign lenders, it’s another tough lesson about the riskiness of the region. The Saudi authorities endorsement of the deal will only further weaken confidence.

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Saudi Arabia's Saad Group struck an agreement with domestic creditors to repay loans, although no deal had been reached between the troubled conglomerate and its foreign lenders, the Kingdom's central bank said on September 28.

The Governor of the Saudi Arabian Monetary Authority (Sama), Muhammad alJasser, said: "Any agreements are good ... This is something between the creditors and the borrowers. My understanding is they have agreed to settle."

Saad is embroiled in a $20bn dispute with rival Saudi conglomerate Ahmad Hamad Algosaibi and Brothers. In August, Ahab accused Saad of fraud in the New York Supreme Court. The two groups owe nonSaudi banks creditors $16bn, according to HSBC.

Earlier in September, Sama said it would not buy up Saad or Ahab debts.

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