Saudi Arabia’s Mobily to Complete Debt Talks in Second Quarter

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Etihad-Etisalat Co., which breached a covenant on some of its debt after a fourth-quarter loss, said it will complete renegotiation of the loans’ terms in the second quarter.

Mobily, as the Saudi Arabian telecommunications company is also known, is “already engaged in discussions with the lenders to obtain a reset of the relevant covenant,” it said in a statement to the Saudi bourse on Tuesday. Mobily shares slumped 7.1 percent at 11:23 a.m. Riyadh, headed for the steepest loss in almost three months.

HSBC Holdings Plc is advising the firm on talks with creditors, three people with knowledge of the matter said in February. The company needs a reset on its debt covenants, an external auditors report said the same month.

Mobily said it met all contractual debt obligations in the first quarter, when it reported a loss of 199 million riyals compared to a 1.6 billion profit last year. Revenue declined to 3.61 billion riyals from 5.09 billion a year earlier, the company said on Tuesday.

Mobily has lost about $8 billion of its market value since accounting errors that affected financial statements for 2013 and 2014 were discovered in November. It has since removed Chief Executive Officer Khalid Omar Al Kaf and appointed Suliman bin Abdulrahman Al-Gwaiz as chairman to replace Abdulaziz Saleh Alsaghyir.

The Capital Market Authority is probing the company for suspected violations of rules related to the disclosure of financial information, market manipulation and insider trading.

Mobily shares retreated for the first time in seven days, dropping to 38 riyals per share. It was the biggest decliner on the Tadawul All Share Index, which fell 0.8 percent.

“The bottom line is that Mobily is still loss-making and it’s clear that the market is punishing it,” Yazan Abdeen, lead fund manager at Jeddah-based Sedco Capital, said by phone. “We’re starting to see the light at the end of the tunnel as there is cash flow generation and this weakness in the share is a buying opportunity.”

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