Zain Saudi Arabia Facing Massive Debt

An investigative report by a Saudi economic newspaper revealed that Zain Saudi Arabia, a subsidiary of the Kuwait telecommunications company, has debts in the form of loans equal to 14.62 billion riyals, or 135% of the company’s total capital.  Furthermore, another 9 billion riyals of debt is scheduled to mature on February 27 after having been extended seven times previously.

For news on other Zain subsidiaries, see:

  • Zain Iraq Plans IPO 2 Years Late
  • Zain Bahrain Committed to Technology
  • Zain Hires New CEO after Poor Year

Al-Eqtisadiya reported that Zain Saudi Arabia is not only burdened by massive debt, but that its liabilities are 354% as large as its assets, at 15.5 billion riyals and 4.4 billion riyals, respectively.  Based on this, the company’s working capital is in the negative at -11 billion riyals.  Zain’s massive debts have overshadowed its revenues, resulting in a 2012 report of 1.75 billion riyals in losses.

According to the Saudi newspaper, Zain’s debts are divided into four main sources.  The first is a joint murabaha loan worth 9.75 billion riyals arranged through BSF in July 2009.  The company received 7.09 billion riyals, and US$710 million.  The company has paid off 750 million riyals using subscription receipts, but has otherwise been postponing the payment date.  Management hopes that it will be able to sign a refinancing agreement this year for 9 billion riyals to handle this debt.

The second part was an advance of 2.56 billion riyals from shareholders in Q3 of 2007.  Zain Kuwait provided 1.95 billion riyals, and Abu Dhabi Investment House lent 8.4 million.  Zain owns 37% of the company bearing its name.

The third part was short-term financing worth 1.88 billion riyals from local banks to be used to pay off 2.24 billion riyals in long-term debts, with a founding shareholder guaranteeing the loan.  The last part was financing from suppliers, with the funds guaranteed by the Zain parent company.

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