Sabic affiliate in $1.3bn stock-for-debt swap

Arabian Industrial Fibres (Ibn Rushd), an affiliate of Saudi Basic Industries Corp (Sabic), said Saturday it had agreed a debt-for-equity swap proposal which will see almost SR5 billion ($1.3bn) in debt converted into ordinary shares.

In a statement on the Saudi bourse web site, shareholders said the company would issue the shares to pay off debts to its main lenders, Sabic and the government-owned Public Investment Fund (PIF). The deal will raise the firm’s capital from SR3.55 billion to SR8.51 billion.

Sabic’s stake in Ibn Rushd would be 45.19% after the swap, while PIF would hold 33.51% with other major stakeholders including the Saudi pension fund, Gulf Investment Corporation, Saudi pharmaceutical SIPMACO and Arab Petroleum Investments Corporation.

The polyester and aromatics producer had accumulated losses equal to 75% of its capital. The swap is an attempt to safeguard the future of the beleaguered company before offering 40% of its capital in an initial public offering.

The company did not have many options beside the swap. According to its rules, whenever its losses reach 75% of its capital, the company’s board must call for an extraordinary meeting to reach a decision to sell it or keep it running.

People familiar with the company’s situation said that the swap will help bring down its losses below 40%.

Arab daily Alsharq Al-Awsat said in November Ibn Rushd owed SR3.6 billion to PIF and SR1.3 billion to Sabic, which includes SR228 million handed out by Sabic for a new plant.

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