American investment banking giant, Goldman Sachs has just bought over the huge stockpile of debt owed by The International Bank Corporation (TIBC).
TIBC was a Bahraini that its failure almost led to the crash of the Saudi economy.
People familiar with the matter were cited by Reuters that Goldman bought $100 million of TIBC debt from Germany’s Commerzbank at the end of last year, two of the sources said, reflecting Goldman’s increased interest in Saudi Arabia.
TIBC raised money in international markets, transferring the funds to now defaulted Saudi conglomerate Ahmad Hamad Algosaibi and Brothers (AHAB), in what a Cayman Islands court last year called one of the largest Ponzi schemes in history.
After TIBC defaulted on a foreign exchange deal with Deutsche Bank in 2009, AHAB – which denies knowledge of the scheme – collapsed, along with another Saudi conglomerate Saad, leaving an estimated $22 billion in unpaid debts.
TIBC, administered by Bahrain’s Central Bank, has a claim of around $3 billion against AHAB, a TIBC spokesman said, while more than 60 banks that have lent money to TIBC remain unpaid.
The sources said Goldman bought TIBC’s debt after rulings in various jurisdictions appeared to strengthen the position of the Bahraini bank against AHAB.
However, if AHAB’s application for a financial restructuring under the kingdom’s bankruptcy law is successful next week, Goldman’s claim may turn out to be worth less than it anticipated.
Reuters claimed that Goldman Sachs and Commerzbank declined to comment on the transaction.