Saudi’s Kingdom Holding’s Investment Growth ‘On Hold’

Saudi’s Kingdom Holding’s Investment Growth ‘On Hold’

Saudi’s Kingdom Holding’s Investment Growth ‘On Hold’

Kingdom Holding’s plan to borrow money to fund new investments is on hold, because owner Prince Alwaleed bin Talal is in criminal detention in Saudi Arabia on anti-corruption charges, according to banking sources familiar with the matter.

Kingdom had approached banks to obtain the loan, but the financing plan has been held up because the lenders are worried about potential repercussions if they lend to the Prince’s company.

A financing hold-up for Kingdom, a leading Saudi investment firm with stakes in prime real estate including New York’s Plaza Hotel and London’s Savoy Hotel suggests the crackdown this month is slowing some new Saudi business activity.

Asked for comment, Kingdom’s CFO Mohammed Fahmy said his company had not asked any bank for a formal loan commitment. He said that terms of any financing deal were never finalized.

More than 200 people were questioned and dozens of Princes, officials and top businessmen detained in the anti-corruption purge. Over 2,000 bank accounts have been frozen by investigators, commercial bankers told Reuters.

The Riyadh government has said the economy will not suffer because investigators are targeting only individuals, not their companies, which can continue to operate as normal.

In a statement issued soon after Prince Alwaleed was detained 2 weeks ago, Kingdom also said it was continuing to operate normally, and that it had the support of the government.

 

Kingdom completed the acquisition of a 16.2% stake in local lender Banque Saudi Fransi (BSF) in September, buying about 50% of France’s Credit Agricole stake in BSF for 5.76-B riyals.

The company approached banks to obtain a loan that would have been secured by its BSF stake, as the company wanted to leverage the newly acquired shares in order to make new investments, according to the sources.

Kingdom’s share price has plunged 19% in the past 2 weeks, erasing about $1.9-B of market value. The allegations against Prince Alwaleed, who owns 95% of Kingdom, include money laundering, bribery and extorting officials.

The allegations could not be independently verified.

Several Saudi and international bankers said in addition to the Kingdom loan, a range of other transactions involving clients who are directly or indirectly involved in the detentions had also been put on hold.

Banks have not reached the point of recalling existing loans, but they have increased the level of scrutiny for some new financing, the bankers said.

In a report last week, debt rating agency Moody’s said a prolonged freeze of bank accounts in Saudi Arabia could damage corporate credit quality in the kingdom because large depositors were often large borrowers and business owners.

“Saudi Arabia’s corporate sector remains dominated by unlisted family-owned businesses with uneven governance and disclosures and frequent intermingling of individual and corporate activities, which ultimately could expose corporates to these individuals’ frozen accounts,” Moody’s said.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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