Bloomberg news reported on Thursday that J&P Overseas defaulted on almost $2 billion after delays in payments from the Saudi government, citing people with knowledge of the matter.
The Saudi unit of Cyprus-based Joannou & Paraskevaides Group defaulted on about 7 billion riyals ($1.9 billion) in bank loans about two months ago. The defaults are largely the result of problems getting paid by the Saudi Ministry of Interior, the people said.
Saudi Arabia suddenly halted payments to government contractors
Lenders, which include Arab National Bank, Alawwal Bank, Banque Saudi Fransi, Emirates NBD PJSC, Saudi British Bank and Samba Financial Group, don’t expect to recover much of the money, Bloomberg reports.
''Faced with a budget deficit that ballooned to $100 billion in 2015, Saudi Arabia suddenly halted payments to government contractors. The move wreaked havoc among local construction firms as many projects stopped, leaving them unable to pay employees. Saudi Oger Ltd., once one of country’s top contractors, collapsed as a result.''
Bloomberg reports that J&P’s Saudi unit has been struggling since then and has also been impacted by a dispute between the parent company’s shareholders, which distracted management attention from the issues in the kingdom.
As a result of that dispute, the parent company is being liquidated by Alvarez & Marsal in Cyprus. That liquidation does not directly impact the Saudi unit’s operations.
The Saudi Finance Ministry said it honors payments that fulfill all of the government’s requirements. A committee to deal with contractor payments has been set up and most disputes have been resolved, Finance Minister Mohammed Al-Jadaan, said last month. In May, many companies were said to have complained about delays.
J&P’s projects in the kingdom include large housing developments for the Ministry of Interior and building parts of the King Abdullah Financial District in Riyadh.
The Cyprus government announced last week that it will assist in the repatriation of J&P employees.