Arabtec plans to get rights issue sorted this month

The contractor Arabtec has said that it is planning to tie up its rights issue – the first step of its capital reorganisation programme to clean up its balance sheet – by the end of this month.

Following a board meeting held yesterday, the company said that it will publish an invitation for shareholders to subscribe to a capital increase tomorrow (May 3). The opening date for those who wish to subscribe to new shares will be Monday, May 15, and the closing date for subscribers is Sunday, May 28.

The company is looking to raise Dh1.5 billion through the rights issue by issuing 1.5 billion new shares, bringing the total number of shares in issue to more than 6.1 billion.

Following this, the number of shares in issue will be reduced on a pro-rata basis by more than 4.1 billion, freeing up liabilities that will allow the company to expunge historic losses worth more than Dh4.1 billion. The company lost Dh3.4 billion in 2016 alone after taking Dh1.9 billion in provisions against its receivables.

The capital reorganisation will be dilutive for minority shareholders who decide against subscribing to new shares, which are being issued at their par value of Dh1 per share, which is above the current market price of 86 fils. This led to criticism of the move from some shareholders at its recent annual general meeting, which took place on 18 April.

However, the issue has effectively been underwritten by the company’s biggest shareholder, Aabar Investments, which currently owns a 36.11 per cent stake in the firm. It has pledged to subscribe to its full allocation and to pick up any additional shares should others decide not to subscribe.

Speaking at the company’s annual general meeting, the new chief executive Hamish Tyrwhitt, who joined the company in November, argued that this capital reorganisation was the only method Arabtec had at its disposal for achieving an effective turnaround as it is already carrying a substantial amount of debt.

“Could we have done a convertible bond? Could we have raised less capital? Could we have taken on more debt? Could we have traded through the challenge that we have? I can assure you that the board and management went through an exhaustive list of options,” Mr Tyrwhitt said.

“Even within the UAE, you can see how companies have dealt with challenges in the past. Some have delisted, some have closed down altogether,” he added.

“What we’re doing here is in the best interest of all shareholders and is in the best interest of the company going forward. You may believe that there are other options. I can assure you that every available option that was available to us, we explored.”

Arabtec has posted nine successive quarterly losses between the third quarter of 2014 and the end of last year, but at the annual general meeting Mr Tyrwhitt hinted that a turnaround may already be underway, with the company likely to generate a profit for the first quarter of 2017.

Arabtec’s board is set to meet again on Thursday to approve its first quarter numbers.

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