Emaar EC Approves Major Debt-To-Equity Capital Boost

(MENAFN- The Arabian Post)

Emaar, the Economic City has secured board approval for a sweeping balance-sheet overhaul that will lift its share capital by nearly 69 per cent through the conversion of debt owed to the kingdom's Public Investment Fund, a move aimed at strengthening liquidity and reshaping the Tadawul-listed developer's financial structure.

The company disclosed that its board has authorised an increase in paid-up capital to 8.83 billion Saudi Arabian riyals, equivalent to about $2.4 billion, from 5.23 billion riyals. The expansion will be executed by issuing 360 million new ordinary shares, raising the total number of shares to 883 million, through the conversion of 4.12 billion riyals in outstanding obligations to the sovereign wealth fund.

The proposal, which remains subject to regulatory and shareholder approvals, underscores the growing role of debt-to-equity swaps in stabilising heavily leveraged property and infrastructure ventures aligned with national development priorities. For Emaar EC, the transaction reduces leverage while formalising the Public Investment Fund's position as a dominant stakeholder, consolidating state backing behind one of the kingdom's flagship urban development projects.

Emaar EC was established to develop and operate King Abdullah Economic City on the Red Sea coast, a vast mixed-use project encompassing residential districts, logistics zones, port facilities and industrial clusters. Despite its strategic importance, the company has faced persistent financial pressure over the years due to high capital expenditure, uneven demand cycles and the long gestation periods associated with large-scale city-building initiatives.

By converting debt into equity, the company avoids immediate cash outflows and improves key financial ratios, including debt-to-equity levels, at a time when the broader real estate sector is adjusting to tighter financing conditions. Analysts tracking Tadawul-listed developers have noted a clear shift toward balance-sheet repair as interest costs remain elevated and lenders apply more stringent terms to large borrowers.

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The Public Investment Fund's involvement reflects a broader pattern of state-led financial restructuring across priority sectors. The fund has increasingly deployed capital through equity injections, asset transfers and debt conversions to reinforce companies deemed central to Vision 2030, the national economic diversification programme. In several cases, these interventions have been framed as transitional measures designed to stabilise operations and unlock longer-term private investment.

For minority shareholders, the capital hike brings dilution, though the company has emphasised that the transaction does not involve cash subscriptions and is intended to support long-term value creation. Market participants will be closely watching how the revised capital structure translates into operational momentum, particularly in advancing residential sales, industrial leasing and port-related revenues within King Abdullah Economic City.

The timing of the move is also notable as Saudi Arabia accelerates infrastructure spending and urban development to support tourism, logistics and manufacturing growth. Large-scale projects across the kingdom have increasingly relied on blended financing models that combine sovereign backing with market funding, reflecting both ambition and fiscal discipline.

Emaar EC's shares have experienced bouts of volatility over the years, often tracking shifts in investor sentiment toward mega-projects and government-linked entities. While the debt conversion may weigh on per-share metrics in the short term, some analysts argue that reduced financial risk and clearer alignment with state priorities could enhance the company's investment profile over time.

Corporate governance considerations will come into sharper focus as the Public Investment Fund's equity stake expands. Observers expect closer scrutiny of project execution, cost controls and revenue diversification as the company seeks to demonstrate that balance-sheet support translates into sustainable performance rather than prolonged dependence on state capital.

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