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Awal Bank extends bankruptcy process to U.S.
Bank files for Chapter 11 in New York; Awal controlled by Saad, Al-Sanea; More than $1 billion liabilities shown in petition.
October 23, 2010 12:38 by Reuters
Bahrain-based Awal Bank BSC has filed for bankruptcy protection in the United States, part of a process kicked off last year when the bank was put into administration in Bahrain.
Awal is controlled by Saudi businessman Maan al-Sanea and his Saad Group. Al-Sanea is locked in a number of legal battles with the Algosaibi family, who run the Ahmad Hamad Algosaibi and Brothers (AHAB) business empire.
“The U.S. filing is simply a recognition and an extension of (Awal’s) insolvency process already happening in Bahrain, as it has some assets and claims against it in the U.S.,” said one source with knowledge of creditor negotiations.
Both business groups ran into financial trouble last year, hit by a heavy debt burden. The Algosaibi family have since accused al-Sanea — who is married to a member of the Algosaibi family — of defrauding them.
In July, a New York State judge ruled that some of the disputes should be heard outside the United States, perhaps in the United Arab Emirates or Saudi Arabia.
A similar case in the Cayman Islands — where some units of the Saad group are based — has been stayed, pending the outcome of negotiations in Saudi-Arabia.
According to its Chapter 11 petition filed with the U.S. bankruptcy court in Manhattan, Awal has between $50 million and $100 million of assets, and more than $1 billion of liabilities.
Saad Investments Co owns a 48 percent stake in the bank and al-Sanea owns 47 percent, the petition says.
Bahrain’s central bank took control of Awal Bank and Algosaibi’s International Banking Corp in July 2009, citing a substantial shortfall in their assets relative to their liabilities.
The case is In re: Awal Bank BSC, U.S. Bankruptcy Court, Southern District of New York, No. 10-15518.
(Reporting by Douwe Miedema; Additional reporting by Jonathan Stempel in New York and Sarah White in London; Editing by Ted Kerr and Chris Wickham)