Emaar EC’s new strategy to steer financial recovery

Emaar EC

Emaar the Economic City (Emaar EC), the master developer of King Abdullah Economic City (KAEC) in Saudi Arabia, has initiated a SAR8.7 billion ($2.3 billion) turnaround plan a month after its first-half 2024 losses showed an almost five-fold increase from 2023.

A capital optimisation plan will allow the Saudi-listed company to restructure its SAR3.8 billion in bank facilities.

It will also convert SAR4 billion debt owed to the Public Investment Fund (PIF) into equity and receive a new convertible facility of up to SAR1 billion from the sovereign wealth fund.

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In addition, the company will implement a capital cut of nearly 50 percent to offset its accumulated losses. Thus, capital will fall to SAR5.7 billion from the existing SAR11.3 billion.

SNB Capital will be the financial adviser, and Khoshaim & Associates will be the legal adviser for the capital cut move.

The capital optimisation plan has been launched two years after thorough analysis. The existing bilateral credit facilities with Alinma Bank, Saudi Awwal Bank, Banque Saudi Fransi and Saudi National Bank amounting to SAR3.8 billion will be restructured into one unified sharia-compliant facility.

These banks will also provide new credit facilities of SAR301 million.

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The move to the debt-to-equity conversion of SAR4 billion will significantly de-leverage Emaar EC’s balance sheet and lower interest expenses.

A new SAR1 billion facility from PIF will boost liquidity and provide funding for short- to medium-term growth.  

“Emaar EC stands at a vital inflection point, as we pivot from a period of transition to one of opportunity,” said chairman Fahad Al Saif.

Last month, Emaar EC’s net loss to widened to SAR694 million in the first six months of 2024 from SAR76.2 million a year ago. The losses reached SAR342 million in the second quarter of 2024, from SAR95 million in the same quarter last year.