Saudi construction firm Azmeel’s creditors approve $2 billion debt restructuring

Overseas staff at a enhancement website in Riyadh, Saudi Arabia, Might 7, 2020. REUTERS/Ahmed Yosri

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• Restructuring to clear stability sheet, making bids simpler
• Azmeel in liquidity crunch since 2019 amid late govt funds
• Workforce shrank to 2,000 from 35,000 in 2017-18
• Perpetual sukuk to be issued in Q2, giving lenders exit path

DUBAI, Feb 4 (Reuters) – Collectors of Saudi Arabia’s Azmeel Contracting Co, Definitely one of many kingdom’s 5 largest builders, have accredited the restructuring of a 7.73 billion riyal ($2.06 billion) debt pile primarily by way of an issuance of perpetual Islamic bonds, its chief restructuring officer said on Friday.

Saudi Arabia’s enhancement sector has confronted myriad factors In current occasions, with many corporations falling casualty amid late funds from The federal authorities, rising prices and swings in oil prices that influence state-backed infrastructure tasks.

About 88% of Azmeel’s credit ratingors, collectively with 90% of financial institutions and 75% of commerce credit ratingors, voted in favour of the restructuring plan, Which may give them The selection to promote their publicity Inside the secondary market ought to they Decide to take movement, Hisham Ashour, Azmeel’s chief restructuring officer and managing director at Haykala Funding Managers, informed Reuters.

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In October 2019, Azmeel was Definitely one of many first Saudi corporations to enter formal chapter proceedings beneath a regulation that acquired here into influence in 2018, An factor of broader Saudi plans To draw foreign investment

Azmeel’s liquidity crunch acquired here to a head in 2019 when consumers, some authorities-associated entities And a few Inside the private sector, made late funds, Ashour said.

That led to accumulating debt that reached 7.73 billion riyals, collectively with unpaid or late salaries and unpaid suppliers, and an equity deficit Of two billion riyals. The agency’s workforce has shrunk to about 2,000 from about 35,000 in 2017-2018.

“The thought of a contracting agency having tens of hundreds of staff Isn’t possible anyextra,” Ashour said.

“The agency Might be going to be Taking A look at a mannequin the place they primarytain enterprise administration and technical capabilities in-house and outsource and sub-contract as a lot as They will.”

‘STRICT COVENANTS’

The debt consists of 5.4 billion riyals in financial institution debt – of which 2 billion riyals are unfunded financial institution ensures, 2.1 billion riyals in claims from commerce credit ratingors and 230 million riyals in worker and authorities dues.

It is going to be restructured by way of the issuance Of seven billion riyals in perpetual sukuk, about 92% of The complete liabilities, with the reprimarying roughly 8% as “residual debt” – secured in the direction of Azmeel belongings like gear and exact property.

“It is going to have strict covenants To Guarantee agency compliance with the phrases of the restructuring plan,” Ashour said.

The sukuk, for which a revenue price has but to be decided, are anticipated early Inside the second quarter, Ashour said. Azmeel is in talks with Saudi lenders To rearrange the deal.

The agency envisions repaying the sukuk over 11 yrs, collectively with a one-yr grace interval. About half of the deliberate sukuk Might have private ensures.

“A money sweep mechanism permits for extra money To be used for earlier reimbursement,” Ashour said, which means any potential upside Inside the enterprise might acceleprice the timeline.

The restructuring appeals to financial institutions As a Outcome of it provides them an Choice to exit the placeas additionally clearing the agency’s stability sheet, permitting it to bid For mannequin spanking new tasks with a extra healthful credit rating standing.

Collectors with The Most very important publicitys embrace Arab Nationwide Bank, Alrajhi Bank, Banque Saudi Fransi, Saudi British Bank, Bank AlJazira, Saudi Nationwide Bank, Bank Albilad, Gulf Worldwide Bank and Emiprices NBD, Ashour said.

King & Spalding suggested Azmeel and Latham & Watkins suggested the credit ratingors on the restructuring.

“This will save jobs And may enhance financial asset restoration for financial institutions and shareholders. It is a win-win,” Ashour said.

($1 = 3.7516 riyals)

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Reporting by Yousef Saba; Modifying by Susan Fenton

Our Requirements: The Thomson Reuters Notion Guidelines.