If you want to know why HSBC was underperforming a rising market on Monday morning, look no further than this fascinating story from Saudi Arabia.
It concerns businessman Maan al-Sanea, who was ranked 62 amongst Forbes’ world billionaires list this year, with a net worth estimated at $7bn.
From today’s FT.
Saudi Arabia’s central bank has ordered the kingdom’s banks to freeze the accounts of Maan al-Sanea, a businessman and significant shareholder in HSBC, senior bankers said on Sunday. The Saudi Arabian Monetary Agency issued the directive in two letters sent to banks on Thursday and Saturday, and included certain members of Mr al-Sanea’s family, bankers who have seen the letters said.The Capital Market Authority has also issued directives blocking banks from selling securities and investment portfolios related to Mr al-Sanea and Saad Trading, Contracting and Financial Services, the Saad Group’s main Saudi-based company, said a banker who had received notification.Through Saad Group, Mr al-Sanea owns a near 3% holding in HSBC, worth about £2bn, as well as stakes in several smaller UK companies such as housebuilder Berkeley and York Pharma.The wires and middle east press have been trying to link the move by the Saudi central bank to a recent debt default by Bahrain-based The International Banking Corporation (TIBC). And this is where things get complicated.
TIBC is a subsidiary of Ahmad Hamad Algosaibi & Brothers, one of the oldest and most powerful family businesses in Saudi Arabia. However, the business links between Algosaibi and Mr al-Sanea are not clear. All we do know is that Mr al-Sanea is married to a sister of a senior member of the Algosaibi family.
From Bloomberg.
Algosaibi said last week that TIBC’s creditors weren’t paid “pending a debt restructuring exercise.” The bank has $2.2 billion of short-and medium-term debt, according to a May 16 report by Capital Intelligence, a credit analysis and ratings company.
Although al-Sanea was at one time named as a managing director of Ahmad Hamad Algosaibi & Brothers Co, he has not acted in such capacity for “many years” and is not involved in the operations of Ahmad Hamad Algosaibi & Brothers Co. “in any way,” a London-based spokesman said on behalf of Saad Group in response to questions from Bloomberg News.
What is more apparent is that Mr al-Sanea and Saad Group were gearing up at about the time the financial crisis took hold.
Al-Sanea’s Saad Investment Co. received a $2.82 billion loan from a group of 26 European, U.S., Asian and Arab banks in September 2007 as the global credit crisis damped demand for debt. Earlier that year, Saad Trading Contracting & Financial Services Co., part of al-Sanea’s Saad Group of companies, said it would borrow $5 billion as part of a 20-year plan to diversify investments inside and outside the kingdom.
And a couple of weeks ago Standard & Poors revised its outlook on Saad Group to ‘negative’ from ‘stable’, citing real- estate exposure and the limited geographic diversity of its holdings.
The ratings are constrained by the high concentration of securities holdings in the global financial services sector, the volatility of Saad Group’s portfolio, the active use of debt to expand Saad Group’s asset base, and the relatively low liquidity of real-estate holdings, which represent an increasing portion of Saad Group’s portfolio.
Somehow, we don’t think the troubles of Mr al-Sanea are going to prove unique. In fact, we are surprised there have not been other blows ups in the middle east given the big bets that were taken on financial and property assets just before the system imploded.
Related links:
The middle eastern appetite for western banks – FT Alphaville from two years ago