Zain Saudi Arabia has announced significant moves to address its debt problem.
The telco, controlled by Kuwaiti telecoms giant Zain Group, said today that it secured a three-year SR2.25bn (US$600m) loan. It also rescheduled payments worth SR5.6bn…
Zain Saudi Arabia has announced significant moves to address its debt problem.
The telco, controlled by Kuwaiti telecoms giant Zain Group, said today that it secured a three-year SR2.25bn (US$600m) loan. It also rescheduled payments worth SR5.6bn (US$1.49bn) to the government.
The loan is provided by a syndicate of four banks comprising Arab National Bank, Banque Saudi Fransi, Gulf International Bank and Samba Financial Group.
Proceeds will be used to repay a murabaha facility of similar size signed in 2011 and maturing this year. The loan is subordinated to its current SR9bn (US$2.4bn) murabaha and is guaranteed by parent company Zain.
Over the last 18 months, struggling Zain KSA has been regularly extending the maturity of its SR9bn loan, against the backdrop of a SR1.75bn (US$466m) loss for 2012.
In May last year, Zain KSA won approval for its capital restructuring plan, which involves reducing the company’s capital from SR14bn (US$3.7bn) to SR4.8bn (US$1.3bn) and the number of shares from 1.4 billion to 480.1 million.
“Based on its business plan, the company believes that it will be successful in meeting its obligations in the normal course of operations and in its efforts to secure the necessary funding and refinancing of its current financial obligations to the banks,” the telco said in its financial results for 2012.
Defers US$1.5bn payments to government
Meanwhile, Zain KSA has signed an agreement with the ministry of finance for the postponement of payments to the government.
The payments, worth SR5.6bn (US$1.49bn), will be equally split into seven instalments over seven years, with the first one due on 1 June 2021. Those payments reportedly related to taxes and other fees to the government.
The instalments will be converted into a commercial loan, Zain KSA said in a statement.
The company’s chairman, Fahd bin Ibrahim Al Dughaither, added that the agreement “will assist Zain KSA’s liquidity position as it would reduce part of the financial obligations the company faces.
“This will in turn result in the reduction of financing costs and accordingly allow the company to use part of that liquidity to continue the expansion and development of its network,” he said.
Zain KSA has been confronted with increasing competition in the Saudi market dominated by STC and Mobily.
Commenting on the government support, ratings agency Fitch said that “in the short term this will help limit the potential for defaults among troubled companies, while in the longer term it may result in governments pushing for cross-border mergers between sub-scale operators.”
