Emaar EC board proposes 49.7% capital cut by converting PIF’s debt

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Emaar The Economic City's (Emaar EC) board of directors decided today,  Sept. 8, to reduce capital by 49.69% from SAR 11.33 billion to SAR 5.70 billion, according to Tadawul website.

The capital reduction is part of the company's financial restructuring plan aimed at boosting its ability to move forward with growth plans.

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SNB Capital was appointed on Sept. 8 as financial adviser for the capital reduction, and Khoshaim & Associates as legal adviser.

Emaar EC will make an announcement when it files the capital reduction application with the Capital Market Authority (CMA) and further developments will be disclosed in line with the CMA rules.

In a separate statement, the company said the board of directors recommended on Sept. 7 increasing capital through converting the SAR 3.97 billion debt owed to the Public Investment Fund (PIF) to new ordinary shares.

This includes the financial obligations and liabilities owed by the company to the fund in accordance with the shareholder loan agreement signed with the fund on Feb. 19, 2023, in addition to the debt transferred by the Ministry of Finance to the fund on Sept. 5, 2024. An agreement will be reached on how to settle the accrued interest after this date, and an announcement will be made if necessary.

The capital increase will lead to the settlement of the company’s obligations to the fund, improve the company’s financial position, and support its growth objectives.

The capital hike is subject to approval from the relevant regulatory authorities and the company's extraordinary general meeting.

SNB Capital was appointed on Sept. 7 as financial advisor for the capital increase through debt conversion, and Khoshaim & Associates as legal adviser.

Emaar EC will make an announcement when it files the capital increase application with the Capital Market Authority (CMA) and further developments will be disclosed in line with the CMA rules.

The company stated that the debt conversion agreement is subject to several preconditions, including approvals from relevant regulatory authorities, agreement between the parties on the debt conversion ratio, and approval of the company’s EGM.

The debt conversion as per the agreement constitutes a full and final settlement of all claims and obligations arising from the transferred amount, in accordance with the shareholder loan from the fund and the ministry loan that was transferred to the fund.

In addition, each party provides a number of customary commitments and guarantees.

The agreement will terminate if the preconditions are not met within one year of its signing or six months of agreeing on the debt conversion ratio, whichever is earlier. The fund also has the right to terminate the agreement earlier in certain cases, including a material breach by the company.

The fund has the right to access information and documents it deems necessary regarding the debt conversion and the company’s general situation, in addition to the relevant confidentiality obligations.

According to data available with Argaam, Emaar EC received on Sept. 5 a notice from the Ministry of Finance regarding the ministry’s loan assignment agreement with the PIF.

Under the agreement, the remaining loan owed to the ministry, together with the related interest and fees, will be assigned to the PIF.