Creditors of Saudi Arabia’s Al Ittefaq Steel Products, the country’s largest private sector steel manufacturer, have provisionally agreed to a 6.2 billion riyals ($1.7 billion) debt restructuring, banking sources told Reuters on Tuesday.
The terms of the deal have still not been finalised but banks have reached an agreement in principle to give the company a two year window in which it would only pay interest on its debt, two of the sources said. After that period a further restructuring would potentially happen, they said.
The company did not immediately respond to a request for comment.
Like many other companies in Saudi Arabia’s construction industry, Al Ittefaq Steel has had to contend with a drop in global steel prices, an influx of cheap Chinese imports and a cut in government-funded infrastructure projects since oil prices sagged.
Chief executive Sharjeel Azhar, a former HSBC banker, told Reuters in an interview on Nov. 30 that the company was hopeful of reaching a deal with banks on its debt restructuring, its second such process in the last seven years.
The restructuring proposal was sent to banks a few months ago, one of the sources said. Another of the sources said the company required a restructuring because of its limited cash flow.
In total, the company has 18 creditors which are mainly Saudi banks but which also include one or two international and regional lenders, Azhar said in November.
It has been in talks with a group which holds upwards of 60 percent of its total debt and which has been put in charge of negotiating a settlement, he said at the time.
The group consists of Saudi British Bank, Arab National Bank, Banque Saudi Fransi, National Commercial Bank, Riyad Bank and Samba Financial Group, Azhar said in November. Gulf International Bank and Alawwal Bank were also creditors, banking sources said.