SAUDI ARABIA. International creditors of troubled Saudi groups Saad and Algosaibi fear being sidestepped by a debt deal reportedly struck between Saad group and Saudi banks, bankers said on Thursday.

Two Saudi bankers told Reuters earlier a Saudi government panel had brokered a debt restructuring deal between Saad and Saudi banks, excluding international banks.

Saad and Ahmad Hamad Algosaibi Brothers and several banks are battling it out in court over the fallout of their debt restructuring, with some bankers putting the total debt involved at US$22 billion.

BNP Paribas and Citigroup are amongst numerous regional and international banks with exposures.

"International banks have not been dealt with", a Bahrain-based source familiar with the debt restructuring told Reuters. If confirmed, any local deal would alienate the international financial community, he said.

Sanea sold on Wednesday a stake of at least 2.8% stake in Samba Financial Group, which was worth at least SAR1.17 billion (US$311 million) based on Wednesday's closing prices, and one of the Saudi bankers said this transaction was linked to the agreement with Saudi creditors.

A senior Dubai-based investment banker said the debt restructuring process would suffer if it was broken up into local and international creditors.

"We are concerned that if local banks are separated from international banks it makes for an incredibly inefficient process", he said.

The restructuring process has already started to fray with several banks having launched lawsuits against the Algosaibi group over alleged financial irregularities.

The banker said a separate debt settlement would further weigh on international banks' perception of Saudi Arabia, after bankers were shocked by the sudden debt problems at the two prominent groups.

"If they differentiate between national and local banks, this will cause a much bigger impediment for big international banks to work with local borrowers", the banker said.

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