Saudi contractor MMG unveils new rescue plan
Firm to use 90% of share capital to cut debt; plans new rights issue
The Dammam-based firm has racked up huge losses over the past four years after signing a series of lossmaking contracts in 2010, which have taken its accumulated losses to around $666mn (SR2.5bn), or around 205% of its existing share capital.
The firm has said that it will reduce the size of its share capital by 90% from $333mn (SR1.25bn) to $33.3mn (SR125mn). This will be done by cutting the number of shares in circulation from 125mn to 12.5mn. The capital will then be used to write down existing liabilities, which, subject to ongoing talks with potential new investors, will allow it to cut the cost of its borrowing, it said.
However, this may lead to "the possible transfer of certain rights and/or benefits to lenders," it added.
If it does gain approval and a promise of new investment, the firm then plans to undertake a new rights issue in order to raise more cash.
The recovery plan will be overseen by its chairman, Eng Adel Mohammad Al Mojil, recently-appointed CEO William Milligan and non-executive director Osama Assad. It involves completing all of its lossmaking 'legacy' project by the first quarter of next year, deploying resources to more profitable work and to be more prudent in its bidding for, and monitoring of, new contracts won.
In a statement, the company said it was "confident that there is strong demand for its services once financial stability has been achieved".
"This will allow for a return to profitability in the subsequent quarters of 2015, and an overall profitable outcome for 2015, increasing to higher levels in subsequent years."
The company had intially launched a rescue plan under former CEO Stewart Macphail in 2012, but the firm was unable to secure new terms from its lenders and as losses continued to mount he was replaced by Milligan in June this year.