How much trouble is Prince Alwaleed’s Kingdom Holding actually in?

There’s an other-worldly aspect to the news release issued by Kingdom Holding on Tuesday. Let’s start with the title:

In an Unprecedented Move, Prince Alwaleed Grants 180 million from his Citigroup Shares to Kingdom Holding Shareholders at no Cost, With Current Value of SR2.24 billion.

Hmm. So does Kingdom have a capital deficit problem and/or does it have an emergency need for spare assets to pledge as collateral? We (mistakenly) thought that all of HRH’s stake in Citi was held through Kingdom, which the Saudi prince chairs and owns 94 per cent. This Citi stock must be from the funds HRH pumped into the ailing US bank just as the credit crunch was getting going.

Further extracts from the release:

The Company also announced that will call for an Extraordinary General Meeting of its shareholders to approve the reduction of the Company’s capital from SR63 billion to SR37.5 billion (a share for every 1.7 share).

The initiative made by Prince Alwaleed bin Talal and the decision made by Kingdom Holding Company will lead the Company to profitability and enable KHC to distribute dividends to the Company’s shareholders once approved by KHC’s Board of Directors. Moreover, this move will allow Kingdom Holding to enhance its position and increase future borrowing capacity.

That raises more questions than it answers. Gifting shares does not, in itself, make a company “profitable.” And why the sudden need to “increase future borrowing capacity”?

Aside from Citi, Kingdom owns some serious assets – stakes in companies like Apple, Pepsico, Proctor & Gamble, News Corporation – as well as genuine trophy assets like the Hotel George V in Paris. HRH, himself, has a pretty pristine reputation in financial circles.

Prince Alwaleed commented: “I personally re-affirm my full and continuous support to Kingdom Holding Company and my initiative to transfer part of my own Citigroup shares is an example of that. We are also confident that these measures will ensure the continuous development of KHC and helps it to withstand the negative repercussions of the global economic crisis.”

Okay, yeah, it’s in trouble. Or at least it was.

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We should remind ourselves at this point that HRH Prince Alwaleed bin Talal bin Abdulaziz Alsaud is considered to be the wealthiest individual in the Middle East

ArabianBusiness.com recently put his worth at $18bn – a figure which the magazine says was verified by HRH’s private office.

Of that $18bn total, HRH’s holding in Kingdom spoke for $7.9bn.

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Back to the release…

Moreover, Kingdom Holding Company will continue to pursue the development of its two mega real estate projects in Kingdom City Riyadh and Kingdom City Jeddah.

Kingdom City Riyadh is a unique city within a city, located on the Dammam highway North East of Riyadh on an area of 16.8 million square meters. The project will consist of residential, commercial, offices and retail facilities. The city will also include a sports club, leisure, horse riding and education facilities, and open parks that meet international standards of quality and that are environmentally friendly.

Kingdom Tower Jeddah, the world’s tallest tower exceeding 1000 m in height, will be the centerpiece of Kingdom City Jeddah, the largest, most comprehensive real estate development to be built on the Red sea coast of the Kingdom of Saudi Arabia. The project will include offices, villas, apartments, hotels, malls, marina, recreational areas, connecting bridges and much more. It is expected to become a world-leading tourist, business and residential centre and offer the best investment opportunity in the Middle East.

Here’s what that tower is supposed to look like. We’re promised something about 40 per cent higher than Dubai’s new Babel.

Madness.END