For the past couple of weeks we've written frequently about the sudden political turmoil in Saudi Arabia that resulted in two Saudi princes being killed in a span of just 24 hours and dozens others being detained on charges of corruption while having their bank accounts frozen. Here are couple of our most recent background posts on the topic:
- The Saudi Purge: The Middle-East Is On The Verge Of A New War
- If The Saudi Arabia Situation Doesn't Worry You, You're Not Paying Attention
Now, per an exclusive report from Reuters, it appears as though the latest casualty of the Saudi shakeup is a financing deal sought by the $8 billion dollar Kingdom Holdings which is owned and run by Prince Alwaleed bin Talal...at least until he was recently arrested that is.
Kingdom Holding’s plan to borrow money to fund new investments has stalled because owner Prince Alwaleed bin Talal has been detained in Saudi Arabia’s anti-corruption crackdown, according to four banking sources familiar with the matter.
Kingdom 4280.SE 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, the sources said.
One of the sources, who was approached for the loan, said it would have been worth roughly 5 billion riyals ($1.3 billion).
For those who aren't familiar with the company, Kingdom Holdings is a leading Saudi investment firm with stakes in prime real estate including New York’s Plaza Hotel and London’s Savoy Hotel.
The busted bank deal apparently surfaced after Kingdom Holdings attempted to pledge an equity position it recently acquired in Banque Saudi Fransi as collateral for a new $1.3 billion loan but several banks balked until the charges levied against Prince Alwaleed bin Talal were resolved.
Kingdom completed the acquisition of a 16.2 percent stake in local lender Banque Saudi Fransi (BSF) 1050.SE in September, buying about half of France’s Credit Agricole stake in BSF for 5.76 billion 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.
One of the four sources, a senior banker at a Saudi financial institution, said the loan deal would not go ahead until the situation facing the prince was resolved.
Of course, Kingdom Holdings is likely not the only Saudi company finding it difficult to tap debt markets these days as Moody's recently warned that a prolonged freeze of bank accounts could "damage corporate credit quality" all across the country.
Eight Saudi and international bankers, including the four sources, 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.
Meanwhile, despite assurances from the Riyadh government that the economy would not suffer from the country's political turmoil "because investigators are targeting only individuals, not their companies," Kingdom Holdings shareholders don't seem to be convinced...