Alwaleed’s Kingdom Said to Hire Citigroup to Cut Loan Costs

Jun 09, 2014 8:39 am ET

(Updates with Citigroup sale of Samba stake in last paragraph.)

June 9 (Bloomberg) -- Kingdom Holding Co., the investment firm of Saudi Arabian billionaire Prince Alwaleed Bin Talal Al Saud, is in talks with banks to cut borrowing costs on a $550 million loan, four people with knowledge of the matter said.

The company hired Citigroup Inc. to coordinate the process, the people said, asking not to be identified as negotiations are private. Kingdom is also seeking to extend the term of the loan, the people said. The facility is due to mature in January 2016, according to data compiled by Bloomberg.

The talks are part of a wider process to renegotiate costs and maturities on all Kingdom’s debt, two of the people said. That process is being led by new Chief Financial Officer Mohammed Fahmy, the people said. The company’s lenders include Saudi Investment Bank, Banque Saudi Fransi, Samba Financial Group, Citigroup and Deutsche Bank AG.

The loan being negotiated is priced at about 3 percent above the London interbank offered rate, one of the people said.

Alwaleed has a long affiliation with New York-based Citigroup, having first invested in the bank in 1991, according to Kingdom’s website. When the company was listed on the Saudi Stock Exchange in 2007, the size of the Citigroup stake was 4 percent, and Alwaleed is the bank’s largest single shareholder, according to a March 2013 statement by Kingdom.

Borrowing Costs

Kingdom joins companies such as real estate developer Emaar Properties PJSC in capitalizing on abundant liquidity at regional banks to drive down borrowing costs. The Riyadh-based company, whose investments include Twitter Inc. and Beijing- based online retailer JD.com Inc., had its biggest profit in six years in 2013, when it posted net income of $194 million. Kingdom and Citigroup declined to comment.

Citigroup doesn’t have a license to operate in Saudi Arabia. Prince Alwaleed said in 2010 that the U.S. bank had applied to open an office in the country. Citigroup left Saudi Arabia when it sold a 20 percent stake in Saudi American Bank, now known as Samba Financial Group, in 2004. Under Saudi Arabian regulations, foreign banks can’t work on domestic corporate banking deals unless they have a local license.