THE SHAKE-OUT AT REDEC
Somewhere off the south of France in early 1986 French officials seized a freighter belonging to Saudi Research and Development Corporation (Redec). The ship was one of nine owned by Redec but it had been mortgaged to Wardley Limited, a subsidiary of the Hongkong and Shanghai Banking Corporation.
Wardley was worried. Redec owed the company SR34.5 million ($10 million) and was reported to be in trouble. Wardley moved fast and had the ship held. Redec promptly retaliated. It applied to the French authorities for repossession, promising to issue a bond setting out fresh repayment terms. But by then the ship had sailed to Crete. Redec switched its application to the Greek courts and finally managed to reclaim the ship.
That one episode in the continuing drama of a struggling company, incidentally the biggest private sector concern in Saudi Arabia. Its problems illustrate the plight of a private firm borrowed heavily in anticipation of compound growth, fed by lavish government spending. Now the spending is over and great houses have gone downhill.
In August 1984 the Ali and Fahd Shobokshi Group had to reschedule more than $400 million in general purpose debt.