U.S. investment bank Goldman Sachs Group Inc. purchased a $100 million claim against failed Bahraini lender The International Banking Corp. B.S.C., or TIBC, from German lender Commerzbank AG at the end of 2018, Reuters reported May 14, citing sources familiar with the matter.
TIBC raised money in international markets and then transferred it to now-defunct A. H. Algosaibi & Bros. Co., or AHAB, which was a Saudi Arabia-based conglomerate, in what a Cayman Islands court deemed "one of the largest Ponzi schemes in history," the report said.
The Bahraini lender defaulted on a foreign exchange transaction with Deutsche Bank AG in 2009 which led to AHAB's collapse, along with Saudi conglomerate Saad. The companies' collapse left an estimated $22 billion in unpaid debts, Reuters said.
TIBC, which is currently under the administration of Bahrain's central bank, has a $3 billion claim against AHAB and is embroiled in a legal struggle to enforce it. More than 60 banks that loaned TIBC money have yet to see repayment, the report said.
In 2018, TIBC secured a $1.6 billion enforcement order against AHAB from a Saudi court created in 2016, called the Joint Directorate of Enforcement at the General Court in Al Khobar, or JDEK, to investigate the collapsed conglomerate's affairs.
Sources told Reuters that Goldman Sachs purchased the debt after rulings in various jurisdictions seemed to favor TIBC's position against the collapsed Saudi conglomerate.
However, AHAB has applied for financial restructuring under Saudi Arabia's bankruptcy law, and if approved in the week of May 20, it will heavily influence the worth of Goldman's purchased claim, the report said.
Meanwhile, in the week of May 6, JDEK suspended TIBC's claims against AHAB until the latter's bankruptcy petition is resolved, Simon Charlton, AHAB's chief restructuring officer, told the newswire.
The suspension was confirmed by a TIBC spokesman, and he added that he believed the $1.6 billion enforcement order was still valid, according to the report.
The sources also told the newswire that two of AHAB's creditors, HSBC Holdings PLC and Austria's Raiffeisen Bank International AG, are seeking the conglomerate's liquidation under the Kingdom's bankruptcy laws, but AHAB is opposed to it.
The Dammam commercial court is expected to issue a ruling on the banks' request to liquidate AHAB in the week of May 20, the report said.