Reuters reported that Saudi Oger has had submitted a request to Saudi banks last month for a standstill on repayments on cSAR13bn of debt, while they collect the receivables from the government. A standstill agreement will allow the company to suspend interest payments, giving it much needed breathing space. This could potentially be followed by debt restructuring, similar to a number of transactions that have been happening quietly since the start of the year. There have been also reports that Saudi Oger has been in talks to sell its stake in Jordan-based Arab Bank and Turk Telekom. Saudi Oger has been facing financial difficulties since last year as the Saudi government slowed down payment to contractors. One estimate puts Saudi Oger’s total outstanding debt at SAR15bn, while it reportedly owes another SAR2.5bn in back and severance pay to workers, and more to contractors and suppliers. Earlier in the year, talks with Saudi government aimed at buying out the construction firm ended in failure. While bulk of the Saudi Oger’s debt is assumed to be with Saudi banks, regional banks (UAE, Qatar) also have exposures to the Saudi contracting sector, and could possibly be exposed to Saudi Oger.   Impact: The decision by Supreme Economic Council recently to pay all outstanding government dues to contractors, if completed before the end of the year, should lead to some ease in payment pressures for contracting companies. This remains a critical part of the eventual debt freeze issue, in our view. News reports suggest that Saudi Oger has about SAR30bn in receivables from the Saudi government for the work it has completed. Should payments from the government remain slow, we believe Saudi Oger is likely to follow up the debt standstill with restructuring talks. While it is very early to discuss the implications, we believe the most likely outcome would be an extension in the repayment period. Banks are likely to push for an increase in lending rates for compensate for extension in the duration of the loan. (Reuters, Murad Ansari)