Tabreed gets approval for share capital cut
Dubai, December 9, 2010
District cooling firm Tabreed, which is restructuring some $1.47 billion in debt, has received regulatory approval to slash its share capital by 80 percent, the district cooling firm said on Thursday.
'The cancellation of shares through a capital reduction is a key component of Tabreed's recapitalisation programme,' Tabreed said in a statement.
Dubai-listed Tabreed, also known as the National Cooling Co, will reduce its number of outstanding shares to 243.4 million from 1.2 billion, cancelling 970 million shares. The new shares will start trading on Sunday.
This is effectively a five-for-one reverse stock split, so each investor will retain one share for every five original shares they held.
'The capital reduction is intended to raise Tabreed's share price above 1 dirham and will enable Tabreed to raise new equity capital, when agreed, in the future,' Tabreed added.
Tabreed's shares are down 90 percent this year, ending Thursday at 0.413 dirhams. The capital reduction will in theory lift its share price to around 2 dirhams.
Companies listed on the UAE's domestic bourses are not allowed to issue shares at below par value, which for Tabreed and most other listed firms is 1 dirhams.
As Tabreed's shares were trading at almost 60 percent below par value, its ability to raise new equity was limited, prompting it to reduce capital, the company added.- Reuters