Golden Belt Sukuk 1 - Inching Closer to Dissolution Event

Citicorp as Delegate has posted another update on the Bahrain Stock Exchange.

1. 22.2% of Certificateholders have voted for Dissolution.  A vote of at least 25% is required.  Earlier this month the vote was 13.62%.
2. The Delegate notes that it is not sufficiently indemnified to its satisfaction.
3. Saad has responded that as long as its assets are frozen it will not be proposing any rescheduling agreement.
4. The matters referred to in the Delegate's 2 February 2010 communication, e.g., Saad's failure to provide a promissory note for the next rental payment and failure to pay BSE fees remain outstanding.

Three comments:

1. It's unclear why it is taking so long for the Certificateholders to vote for dissolution.   This is an important step to protect their rights.  If we believe recent press reports, a large number of lenders are preparing to launch legal actions against Saad.  One doesn't really want to sue after other lenders have obtained judgments and may be in the process of enforcing them.  It's usually first come first served.  
2. Note the comment about the Delegate's lack of indemnification.  If you look closely at the announcement, you'll see that dissolution involves two things:  reaching the 25% vote and indemnifying the Delegate.  The Delegate is looking among other things for a commitment to be paid.
3. It's unclear why Saad would at least not provide the new promissory notes.  As you'll recall from my analysis of the structure of this transaction, the notes are a device designed to try and avoid a messy discussion about the "rent' (or interest) payments in Saudi Courts.  As the Offering Circular for the transaction warned, the periodic Payable Rental Amount (the "Rent") did not bear any discernible relationship to the underlying economic value of the land and thus just might be challenged in Saudi Court.  The pro note is an attempt to get around this by having the Rent as simple debt.  It couldn't be that Saad is attempting to weaken its creditors' case in a Saudi Court. The BSE listing fee is a trivial amount.  It would seem to be well within the living expenses granted Mr. AlSanea by the Courts.

Most recent earlier post here.  Other posts can be accessed using the label "Golden Belt Sukuk 1".