Zain Saudi Arabia in talks with kingdom's Finance Ministry to convert debt to equity

The telecoms operator may convert all or part of its debt into shares

Zain KSA, a part of Kuwait telecom provider Zain Group, is in talks with Saudi Arabia's Finance Ministry for a debt-to-equity deal. Reem Mohammed / The National

Zain Saudi Arabia is in talks with the kingdom’s Ministry of Finance to convert the debt it owes into shares.

The telecom operator, a unit of Kuwait-based telecoms operator Zain Group, may convert the entire debt or part of it into shares, it said in a bourse filing to the Tadawul stock exchange on Monday. It did not specify the amount it owes to the ministry.

The company is proposing a reduction in its share capital and a subsequent capital increase via a rights issue.

Zain has “entered into discussions with aim to convert whole or part of the outstanding debts due to the ministry into shares in the company, through partially underwriting of the proposed rights issues or any other means”, it said in the statement.

It said the planned transaction is subject to the outcome of the negotiations with the ministry. It did not, however, say when it expects to finalise talks. Zain Saudi Arabia will also have to seek necessary approvals from governmental and regulatory bodies including the Communication and Information Technology Commission and the Capital Market Authority, and present the deal to its shareholders.

The financial impact of the proposed transaction cannot be calculated currently, it noted.

In June, Zain KSA, as the company is commonly known, signed a 2.25 billion Saudi riyals (Dh2.2bn) Islamic loan to refinance an existing facility with Commercial and Industrial Bank of China.

A consortium of five lenders including Al Rajhi Banking and Investment Corporation, Arab National Bank, Banque Saudi Fransi, First Abu Dhabi Bank and Samba Financial Group raised the two-year Sharia-compliant debt, which is fully secured by the parent Zain Group, the company said at the time.

The company last month swung to a second-quarter net profit of 130 million riyals versus a loss of 38m riyals a year ago. Net revenue for the quarter rose 11 per cent to 2.01bn riyals compared, Zain Saudi said in a filing to Tadawul in July.