MMG board approves recovery plan
Troubled Saudi contractor to use most of its existing capital base to pay off debts and will raise new cash through a share issue
The MMG board has approved a recovery plan that will use most of its existing capital to pay off debts.
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The board of Mohammad Al-Mojil Group (MMG) has approved a recovery plan that will use most of its existing capital base to pay off debts and raise new cash through a share issue.
The firm has not traded on the Saudi bourse since July 2012 after it ran into financial difficulties after over-extending itself trying to take advantage of a booming construction market in the Kingdom. Its shares were suspended by the regulator after it breached rules relating to accumulated losses.
In September of this year, MMG said that its accumulated losses for the period ending August 31 stood at $717.1 million, equivalent to 215% of its paid-up capital, a Reuters report said. Saudi shares are suspended once losses pass 75% of capital.
Under the plan approved at a board meeting, the Saudi contractor will see its capital cut from $333.2 million to $33.2 million, creating one share for every 10 shares currently possessed, it said in a bourse filing.
By using this accountancy technique, MMG will effectively be allowed to write off some of its accumulated losses.
At a later stage, the board said that it would recommend increasing the capital again via a rights issue and/or through preferred shares to help it restructure its operations.
Furthermore, the plan would also see a ‘significant reduction’ in the amount payable to the lenders in respect of outstanding sharia-compliant loan facilities, the board’s statement explained.
All of these steps would be subject to the outcome of negotiations with potential new investors, existing lenders and regulatory approval, it added.
Should the restructuring go ahead, it is hoped that all legacy projects would be completed in the first quarter of 2015, the Reuters report added. This would allow the business to return to profitability in subsequent quarters as it takes on new business opportunities.
