Jabal Omar receives shareholder approval to settle $1.42bn debt for new shares

The debt-to-equity deal is the 'most significant transaction' in its capital structure optimisation plan, company says

Tadawul stock exchange-listed Jabal Omar Development is looking to capture growth opportunities in the kingdom's booming tourism sector. Photo: Jabal Omar

Jabal Omar Development Company, one of Saudi Arabia's biggest listed developers, has received shareholder approval to issue new shares in exchange for settling 5.3 billion Saudi riyals ($1.42bn) worth of debt as part of its capital restructuring plans.

The company, which is behind the mega development in the holy city of Makkah, said shareholders approved the debt-to-equity transaction during its extraordinary general meeting on August 25.

Under the deal, Jabel Omar will issue 225 million ordinary shares to unit holders of Alinma Makkah Real Estate Fund in exchange for extinguishing all debts owed by the company and settling “all rights and obligations related to the fund”, the developer said on Sunday in a statement to the Tadawul stock exchange, where it shares are traded.

Jabal Omar’s debt owed to the fund primarily constituted rent payments and other related obligations. With the settlement of the debt, the legal ownership of the assets in the fund — consisting of three hotels and two commercial centres in phase one of the Jabal Omar development — will be transferred back to the company.

“We look forward to welcoming our new shareholders and want to reaffirm the company’s determination to deliver sustainable value by executing on its comprehensive transformation strategy,” Saeed Al Ghamdi, chairman of Jabal Omar, said.

Jabal Omar is the developer behind the multi-use, mega-project across 2 million square metres overlooking the Grand Mosque in Makkah. The property company, which owns a number of mixed-use towers in the holy city, is going through a business and financial transformation plan that is designed to enhance efficiencies and reduce costs and liabilities.

The developer, which has reported improved operating performance during the past few quarters, is looking to capture growth opportunities in the kingdom’s booming religious tourism sector, driven by Hajj and Umrah pilgrimages.

Shareholder approval of the deal came at a “crucial time” for the company, which reported 391m riyals in revenue at the end of the first six months of the year, edging close to its pre-pandemic levels.

In November last year, the company received approval from Saudi Arabia’s Ministry of Finance to restructure a 3bn riyal government loan as part of its financial transformation plan.

The agreement will have “immediate and significant long-term positive impacts” on the company’s financial position, allowing it to accelerate the pace of development of its Jabal Omar master plan and supporting the government's goal of hosting 30 million pilgrims by 2030, it said at the time.

The company’s latest debt-to-equity deal with the Alinma Makkah Real Estate Fund is the “largest and most significant transaction within our comprehensive capital structure optimisation plan”, chief executive Khaled Al Amoudi said.

The deal has set the company on a path towards a better and more sustainable future as it continues to transform its business, he said.

The arrangement will allow Jabal Omar to free up 540 million riyals in cash and allocate the funds to more productive, value-enhancing use, Mr Al Amoudi said.

“This transaction will see our liabilities drastically shrink, our balance sheet deleveraged, and our liquidity profile significantly improve,” Mr Al Amoudi said. “We have turned a critical corner and are on an accelerated journey towards our next phase of growth.”

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