Zain Saudi Arabia is planning to cuts its capital by 65.6%, after which it will raise $1.6 billion through a rights issue to reduce bank debt and fund expansion.
The capital reduction will result in the company’s paid-up capital being reduced to SAR 4.801 billion ($1.28 billion) from SAR 14 billion ($3.73 billion). The paid-up capital will then be increased to SAR 10.801 billion ($2.88 billion) through the rights issue.
The rights issue will consist of raising fresh equity and the capitalisation of subordinated shareholder loans to the company. Zain KSA will use the fresh equity to reduce bank debt, and to invest in its network, including expansion of its LTE network. The funds will also be used for the “future growth of the company”, while the capitalisation of the shareholder loans will help to reduce debt.
The plan is subject to the consent of KSA’s Capital Market Authority and the Ministry of Industry and Commerce, and the approval of other relevant parties, Zain said in a statement.
Zain said that the capital reduction and the rights issue will be subject to shareholder approval at extraordinary general meetings. “This capital restructuring and rights issue will strengthen the financial position and ensure the long-term viability of the company,” said Nabeel Bin Salamah, CEO, Zain Group.
He added that the plan would “strengthen the relationship” between Zain KSA and Zain Group. “Zain KSA will be transformed, allowing the company to deliver the very latest network technology and exciting broadband product offerings to all our customers,” he said.
Bin Salama reiterated his commitment to the Saudi operation, just weeks after a consortium led by Batelco Group and Kingdom Holding Company scrapped a plan to buy Zain Group’s 25% stake in Zain KSA.
“We have decided to take a vigorous approach towards Zain KSA and to make it a key pillar of Zain Group's focus. The combination of a new management team, an ambitious investment plan and new financial structure will have a positive impact on the performance of the company and create value for all its stakeholders,” he said.