Zain Saudi’s board proposes capital cut, rights issue

Mobile Telecommunications Company Saudi Arabia’s (Zain) board of directors on Wednesday recommended a 38 percent capital cut to around SAR 3.6 billion from SAR 5.8 billion to write off accumulated losses worth SAR 2.2 billion, the telecom company said in a statement to Tadawul on Wednesday.

The capital reduction will be effected by cancelling over 222 million shares--38 shares for every 100 shares owned-- following which the total number of shares will be reduced to around 362 million shares from 584 million earlier.

The capital cut will become effective at the end of the following trading day after the extraordinary general meeting’s approval, and it will not have any impact on the shareholders’ percentage of ownership or the company’s operations and obligations, the statement said.

Following the capital reduction, Zain Saudi plans to increase capital by SAR 6 billion from around SAR 3.6 billion to SAR 9.6 billion through a rights issue.

The rights issue will be offered to shareholders registered on the day of the EGA’s meeting approving the rights issue, and whose names appear on the Company’s register at the Securities Depository Center at the end of the second trading day following the EGA.

The capital re-structuring is expected to improve the financial performance, profitability and leverage ratios of the company, the statement added.

Both the capital cut and capital hike are subject to regulatory approvals including the Capital Market Authority (CMA).

Zain Saudi has appointed Saudi Fransi Capital (SFC) as financial advisor to assist in strengthening its financial position, and appointed Baker & McKenzie Lim as legal advisor to manage the capital reduction and rights issue applications.