Arabtec sets price for rights issue at a premium

Arabtec Holding has announced that it is to price the rights issue it is undertaking as part of a recapitalisation at Dh1 per share, which is a premium of 14 per cent to the Dh0.86 per share on Tuesday night’s closing price, but the minimum price at which the offer can take place.

The pricing of the offer at a premium to its closing price means that shareholders who decided not to take up new stock as part of the recaptilastion face a potential dilution of their holdings by 24.53 per cent. However, under stock market rules, shares offered in rights issues cannot be offered below their par value.

The company is attempting to raise Dh1.5bn through the rights issue to help strengthen its balance sheet after enduring a heavy run of trading losses stretching over nine consecutive quarters.

Arabtec’s audited financial statements also released on Wednesday show that by the end of last year, the accumulated losses on its balance sheet stood at Dh4.6 billion, or 101 per cent of its current share capital. It declared a loss attributable to its parent company of Dh3.4bn last year, of which Dh1.9bn was from writing off receivables and other items.

Its recapitalisation programme involves first raising the funds by issuing 1.5 billion new shares, bringing the total number of shares in circulation to 6.1 billion. It will then effectively cancel more than 4.6 billion shares, reducing each shareholder’s stakes on a pro-rata basis. This cancellation then reduces the book value of the company’s liabilities by more than Dh4.6 billion, generating a paper gain that can be used to extinguish accumulated losses.

This recapitalisation has effectively been guaranteed by Arabtec’s biggest shareholder, Aabar Investments, which currently holds a 36.11 per cent stake. It has agreed to take up all of its allocation in the issue, as well as subscribing to any shares that are not taken up by current shareholders.

Arabtec has said that the recapitalisation is the first step in a three-part strategy that it has set out to embark on a lasting turnaround. The first step, which will run over the course of this year, involves strengthening its balance sheet through the recapitalisation, resolving legacy claims and selling non-core assets.

Arabtec’s chief executive, Hamish Tyrwhitt, said: “Arabtec acknowledges the disappointing losses incurred for the financial year, and our group’s approach of prudent financial management – specifically in addressing impairments from high-risk items – provides our shareholders with demonstrable steps in securing visibility on the future of our business and reinvigorating the group.”

He said that it was confident that “the combination of the recapitalisation programme and the strategic plan of the business will enable Arabtec Holding to capitalise on the positive long-term outlook for the construction and engineering sector in our key geographic markets.”

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