Saudi Arabia’s Al Ittefaq Steel Products Co., the kingdom’s largest private-sector steel manufacturer, is taking steps to address its financial challenges by soliciting proposals from restructuring advisors, according to sources familiar with the matter, as reported by Bloomberg. The move comes as the company prepares for negotiations with debtholders, including major creditor Davidson Kempner Capital Management LP, to manage its substantial debt load. Operating under Al Tuwairqi Holding, Al Ittefaq is navigating a tough market environment marked by global steel price volatility and regional economic pressures, prompting this strategic effort to stabilize its finances.
The Dammam-based company, known for producing 2.5 million tons of reinforcement rebar and wire rod annually, has faced ongoing financial strain, with a history of debt restructuring. In 2016, Al Ittefaq negotiated a deal for 6.2 billion riyals ($1.6 billion) in debt, as noted by Reuters, and in 2011, it reached an out-of-court settlement with 18 banks to refinance 7.5 billion riyals ($2 billion), per the Financial Times. “We’re hopeful banks will see the underlying strength in our business,” CEO Sharjeel Azhar said in 2016, reflecting optimism during earlier talks. The current restructuring effort involves a group of creditors holding over 60% of the company’s debt, including Saudi British Bank, Arab National Bank, and Riyad Bank, alongside international lenders like HSBC and Standard Chartered.
The steel industry in Saudi Arabia continues to grapple with challenges, including a flood of low-cost Chinese imports and reduced government-funded infrastructure projects, which have strained cash flows. Al Ittefaq’s clients have required extended credit periods, though no defaults have been reported, according to Azhar’s 2016 remarks. The company’s production facilities, which include direct reduced iron (DRI) and electric arc furnace (EAF) technology, remain a cornerstone of its operations, supporting products like billets and downstream steel goods, per the Global Energy Monitor.
Key aspects of the restructuring process include:
- Advisor Engagement: Al Ittefaq is seeking expert proposals to guide debt talks.
- Major Creditors: Davidson Kempner and Saudi banks hold significant debt portions.
- Industry Challenges: Global steel price drops and Chinese imports pressure finances.
The Saudi government has taken steps to support the industry, such as lifting a cement and steel export ban in April 2016 and exploring higher import duties on steel, as noted by a UAE official. Despite these efforts, Al Ittefaq has not yet exported, awaiting policy clarity, Azhar previously stated. As the company, which employs around 1,000 workers across five continents, prepares for its 2025 negotiations, the outcome could set a precedent for other regional firms facing similar debt challenges.
Sources: Bloomberg, Reuters, Financial Times, Global Energy Monitor, Zawya, Kallanish
