Mazaya in talks for debt-to-equity swap

Developer in talks with banks in Dubai, Kuwait and Bahrai. (EB FILE)

Al Mazaya Holding, a Kuwait-based property developer, is in talks with regional banks for a debt-to-equity swap, as it holds at least 50 million shares in its treasury, a top company executive said.

"We are in talks with banks in Kuwait, Bahrain and Dubai to offer our treasury shares in return for conversion of debt into equity. We hold about 10 per cent of our stock as treasury shares," Khalid Esbaitah, CEO, Al Mazaya Holding, told Emirates Business.

Treasury shares are shares that a company keeps in its own treasury. It may have come from a repurchase or buyback from shareholders; or it may have never been issued to the public in the first place. These shares do not pay dividends, have no voting rights, and should not be included in shares outstanding calculations.

"We are looking to transfer some of our debt into equity… as it gives breathing space to revive," Esbaitah said.

According to company's unaudited financial information ended September 30, 2009, there are 49.3 million shares in the treasury, which is 9.68 per cent of the issued shares. Term loans stood at KD44.97 million (Dh570.5m).

"A debt-to-equity swap is one of the last resorts between the developer and the lender. It is a painful process, but banks tend to get something in return for the loan," a financial analyst said on condition of anonymity. "Although it is not a trend in this part of the world, firms are likely to approach banks for a debt-to-equity swap. However, valuation of the share price is a big concern," he added.

Esbaitah told this newspaper last month that the company was revisiting its plans to acquire the remaining stake in First Dubai Real Estate Development. Al Mazaya currently owns 67 per cent of First Dubai.

"The board has allowed us to revisit our strategy and we are looking to acquire the remaining stake as we believe it will benefit both companies," he said.

 

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