Saudi Utility Converts $45 Billion Liabilities to Quasi-Equity

(Bloomberg) -- Saudi Electricity Co. will reclassify 168 billion riyals ($45 billion) of liabilities as “equity-like” instruments, as the state-controlled utility looks to bolster its balance sheet.

The liabilities, owed to the Saudi Arabian government, “will be converted into a perpetual deeply subordinated equity-like financial instrument,” the company said in a statement Monday. “This conversion is considered non-dilutive and will therefore have no impact on the company’s existing shareholders’ stake.”

The utility, based in Riyadh, was granted a royal approval for the change. Its shares fell 1.5% to 21.72 riyals as of 11:04 a.m., paring this year’s gain to 7.4%.

The new instrument will have a redemption option and a profit rate of 4.5% annually, and be payable once SEC distributes dividends for ordinary shares. It represents about a third of the company’s total assets at the end of the third quarter. The conversion includes government loans and 3.35 billion riyals of dividends owed to Saudi Aramco since SEC’s inception in 2017.

HSBC Saudi Arabia advised SEC on the transaction.

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