Bankruptcy reforms ‘will spur Saudi Arabian investment’

Bankruptcy regulations in line with global standards are a major step in overhauling the Saudi economy, analysts say. (Shutterstock)
Updated 01 August 2018

Bankruptcy reforms ‘will spur Saudi Arabian investment’

  • Saudi Arabia will introduce its first comprehensive bankruptcy law on Aug. 18
  • The new rules have been drawn up to offer protection to creditors

LONDON: Saudi Arabia will introduce its first comprehensive bankruptcy law on Aug. 18 in a move designed to encourage foreign and domestic investment in private business, experts say.
The move is also seen as providing a boost for competitiveness and jobs, and to help pave the way for the transfer of knowledge and skills as part of a drive to modernize the economy.
Based on internationally recognized insolvency standards, the new rules have been drawn up to offer protection to creditors such as banks, as well as stricken companies that seek to wind up their affairs in an orderly manner, thereby shielding themselves from arbitrary seizure of their assets.
“The new regulations will offer lenders, firms and their executives peace of mind and spur overseas investment in the private sector,” said Dario Najm, an associate in the corporate and M&A practice at BSA Ahmad Bin Hezeem & Associates LLP in Riyadh.
In an interview with Arab News, he said that until now there had been little in the way of “procedural clarity” in the way bankruptcies have been handled in KSA. But this was vital to generate confidence and “bring in foreign direct investment that will help to expand the private sector in line with Vision 2030, and refashion the economy.”
Najm also indicated that many investors were waiting for the new laws to come into force before making KSA investment decisions.
The laws would encourage the creation of new enterprises and medium-sized businesses, by Gulf and overseas entrepreneurs, creating employment for Saudi nationals, Najm said. It would generate confidence that a formal system was in place to liquidate companies that had run into trouble, or allow them time to recover by arranging a debt-repayment schedule.
Jason Tuvey, Middle East economist at Capital Economics, told Arab News that “there is a good chance these latest developments will help to attract more foreign investment, and aid the wider economy in terms of knowledge transfer, which in turn could lead to stronger productivity growth.”
He said that the law would encourage risk-takers to invest capital in new businesses that will help take the country away from its dependency on oil.
“It allows creditors and debtors to enter into agreements to schedule the payment of debts, a measure that will enable indebted corporations to achieve a stable financial status.”
Confirmation that the new bankruptcy law would be implemented in five weeks came from a Saudi Ministry of Commerce and Investment official during a workshop.
Speakers said that the bankruptcy law served an Islamic purpose, which was the preservation of money, and was to be applied according to the best international practices for addressing financial issues, Asharq Al-Awsat newspaper reported.
Majed Al-Rasheed, secretary-general of the Bankruptcy Commission at the Ministry of Commerce and Investment, was quoted as saying the law provided “a set of tools and solutions that regulate the value of the debtor’s assets to be sold at the highest possible price in a short period of time, and this establishes trust in the credit market.”
Maher Saeed, director of the bankruptcy law project, said that the new laws — first outlined in February — included seven chapters for bankruptcy procedures.
The idea was to take into account the circumstances of defaulters and small debtors, providing them with special procedures.
“The law will bolster Saudi national choices emphasized in Vision 2030, which aim to establish a prosperous economy, facilitate business, help investors overcome financial obstacles, and empower debtors,” he said.


HP rejects Xerox takeover bid, says open to acquiring Xerox instead

Updated 18 November 2019

HP rejects Xerox takeover bid, says open to acquiring Xerox instead

  • In rejecting Xerox's $33.5 billion cash-and-stock acquisition offer, HP said the offer “significantly” undervalued the personal computer maker
  • Xerox made the offer for HP on Nov. 5 after resolving its dispute with its joint venture partner Fujifilm Holdings Corp.
NEW YORK: HP Inc. said on Sunday it was open to exploring a bid for US printer maker Xerox Corp. after rebuffing a $33.5 billion cash-and-stock acquisition offer from the latter as “significantly” undervaluing the personal computer maker.
Xerox made the offer for HP, a company more than three times its size, on Nov. 5, after it resolved a dispute with its joint venture partner Fujifilm Holdings Corp. that represented billions of dollars in potential liabilities.
Responding to Xerox’s offer on Sunday, HP said in a statement that it would saddle the combined company with “outsized debt” and was not in the best interest of its shareholders.
However, HP left the door open for a deal that would involve it becoming the acquirer of Xerox, stating that it recognized the potential benefits of consolidation.
“With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction,” HP said in its statement.
The move puts pressure on Xerox to open its books to HP. Xerox did not immediately respond on Sunday to a request for comment on whether it will engage with HP in negotiations as the potential acquisition target, rather than the acquirer.
HP on Sunday published Xerox CEO John Visentin’s Nov. 5 offer letter to HP, in which he stated that his company was “prepared to devote all necessary resources to finalize our due diligence on an accelerated basis.”
Activist investor Carl Icahn, who took over Xerox’s board last year together with fellow billionaire businessman Darwin Deason, said in an interview with the Wall Street Journal last week that he was not set on a particular structure for a deal with HP, as long as a combination is achieved. Icahn has also amassed a 4% stake in HP.
Xerox had offered HP shareholders $22 per share that included $17 in cash and 0.137 Xerox shares for each HP share, according to the Nov. 5 letter. The offer would have resulted in HP shareholders owning about 48% of the combined company. HP shares ended trading on Friday at $20.18.
Many analysts have said there is merit in the companies combining to better cope with a stagnating printing market, but some cited challenges to integration, given their different offerings and pricing models.
Xerox scrapped its $6.1 billion deal to merge with Fujifilm last year under pressure from Icahn and Deason.
Xerox announced earlier this month it would sell its 25% stake in the joint venture for $2.3 billion. Fujifilm also agreed to drop a lawsuit against Xerox, which it was pursuing following their failed merger.

Test for new HP CEO
In 2011 as the centerpiece of its unsuccessful pivot to software. Little over a year later, it wrote off $8.8 billion, $5 billion of which it put down to accounting improprieties, misrepresentation and disclosure failures.
More recently, HP has been struggling with its printer business segment recently, with the division’s third-quarter revenue dropping 5% on-year. It has announced a cost-saving program worth more than $1 billion that could result in its shedding about 16% of its workforce, or about 9,000 employees, over the next few years.
Xerox’s stock has rallied under Visentin, who took over last year as CEO. However, HP said on Sunday that a decline in Xerox’s revenue since June 2018 from $10.2 billion to $9.2 “raises significant questions” regarding the trajectory of Xerox’s business and future prospects.