King & Spalding and Latham & Watkins are advising on the landmark $2bn restructuring of Azmeel Contracting, one of Saudi Arabia’s largest builders.

The agreement is among the largest restructurings under insolvency legislation which came into force in 2018 as part of a wider plan to draw in foreign direct investment. It promises to set a precedent for future transactions in the Kingdom, according to King & Spalding, which is advising Azmeel.

A team from Latham & Watkins is acting for the creditors, which include Arab National Bank, Banque Saudi Fransi, Saudi British Bank, Bank AlJazira, Saudi National Bank, Bank Albilad, Gulf International Bank and Emirates NBD. 

As part of the deal, 92% of the company’s $2bn worth of liabilities will be converted into perpetual sukuk — an Islamic financial certificate similar to a bond — with the remaining 8% into covenant heavy debt, according to the company’s chief restructuring officer Hisham Ashour. 

The deal structure will be ‘essential’ for allowing the business to procure new projects, Ashour said, with the perpetual debt providing an opportunity for secondary trading for lenders looking to exit their positions, a rare position to come by in Saudi Arabia. 

Azmeel first ran into trouble in 2018 due to changes in market dynamics, delayed payments from project owners and increased costs, Ashour wrote on Linkedin. 

Leading King & Spalding’s team in the Middle East is partner trio Nabil Issa, Michael Rainey and Zaid Hadir Al-Farisi. Senior counsel Mohammed Al Ammar, counsel Jonathan Jordan and Asal Saghari and associate Turki Radain are also working on the transaction. 

Issa and Al-Farisi split their time between the firm’s Dubai office and affiliated offices in Riyadh, while Rainey is based in Dubai full-time. The trio are members of the firm’s corporate, finance and investments group. 

Rainey said: “This is a landmark transaction when it comes to financial restructurings in Saudi Arabia. The country only implemented major new insolvency laws in 2018 so there was very little in the way of precedent for a restructuring so large and complex. For example, how to account for contingent and late claims, what constitutes a secured claim under the law and determining classes of creditors.” 

“Ultimately, we are exceptionally pleased that Azmeel will be able to clean up its balance sheet and start bidding for new projects as the country continues to invest in its Vision 2030 initiative.” 

Last year, UK listed law firm DWF was among the 44 companies licensed to open regional headquarters in Riyadh as part of the Kingdom’s Future Investment Initiative. Other companies to bring their business to Riyadh included Unilever, Baker Hughes and Siemens, among others.