EEC novates debt to PIF as it lays out “capital optimization plan”

EEC transfers debt to PIF + restructures finances: Emaar the Economic City’s (EEC) SAR 2.9 bn loan from the Finance Ministry has been novated to the Public Investment Fund (PIF), EEC said in a filing to Tadawul. The move sees all of EEC’s liabilities relating to the outstanding loan to the Finance Ministry transferred to the PIF, which is a major EEC shareholder. The debt was recently restructured, with the Finance Ministry granting EEC a one-year grace period until 1 June, 2025, the disclosure notes.

Part of a bigger plan, with lots more from PIF: The move comes as part of a wider debt and “capital optimization plan” that looks to reboot EEC’s growth efforts, the firm said in a press release (pdf) . The plan includes EEC receiving a separate SAR 1.1 bn shareholder loan from the sovereign wealth fund, which — along with the SAR 2.9 bn loan — will be fully converted to share capital.

At the same time, the EEC could be reducing its capital to offset losses + improve its balance sheets: In addition to the debt restructuring, the company’s board of directors proposed a 49.7% capital reduction to SAR 5.7 bn via the cancellation of some 563k shares in a bid to offset accumulated losses, which stood at SAR 5.6 bn at 1H 2024, according to a filing to Tadawul.

That’s not all: The Saudi developer also inked a non-binding term sheet with the PIF to explore a loan of up to SAR 1 bn, with the terms including an option to convert the loan amount into further equity for the fund in EEC, according to a separate disclosure to the exchange. EEC’s board also recommended an SAR 3.9 bn capital increase to cover liabilities from a February 2023 loan from the PIF and the MOF loan novated to the PIF according to another disclosure, thereby giving the PIF a larger stake in the company.

EEC wants to reshuffle some of its other debts too: The firm is also looking to reschedule c.SAR 3.8 bn in loans to local lenders Alinma Bank, Saudi Awwal Bank, Banque Saudi Fransi, and the Saudi National Bank under a single non-binding term sheet, according to the press release. The agreement — which is pending regulatory and shareholder approval — includes a fresh SAR 301.4 mn credit facility, according to a separate Tadawul filing.

ADVISORS- EEC has tapped SNB Capital as the financial advisor and Khoshaim and Associates as the legal advisor for the capital reduction. Khoshaim and Associates will also advise EEC on other transactions related to its debt and equity restructuring.

IN OTHER DEBT NEWS-

Nomu-listed escalator company Mayar Holding submitted a request to the Capital Market Authority for approval to issue SAR 500 mn in convertible sukuk, according to a disclosure to Tadawul. The SAR-denominated sukuk will be issued over a 24-month period through a number of separate issues offered publicly in the market. Mayar received shareholder approval for the issuance in July, setting the maximum number of new shares at 1 mn. The proceeds of the issuance are earmarked for financing Mayar’s working capital and capital expansions.