Dubai

Arabtec Holding said on Tuesday that its Dh1.5 billion rights issue has been fully subscribed and that the company’s board has approved increasing share capital to Dh6.1 billion from Dh4.6 billion.

The new shares of the Dubai-listed construction firm will be listed on the Dubai Financial Market (DFM), and are expected to start trading on June 21, subject to regulatory approval.

The listing of the new shares comes after Arabtec’s rights issue in mid-May, which was fully committed by Aabar Investments, Arabtec’s largest shareholder.

In a statement on Tuesday, Arabtec said it intends to use the net proceeds from the rights issue to fund completion of ongoing projects, support the business plan, and provide financial flexibility to pursue growth opportunities.

While shares on the rights issue rocketed on the first day of trading, investors who bought contractors to participate in the rights issue were left with a 33 per cent loss at the end of the week, Bloomberg reported.

The rights issue, which was part of Arabtec’s recapitalisation plan to turnaround financial performance, will be followed by a capital reduction exercise to extinguish the contractor’s losses.

At the end of December 2016, Arabtec had Dh4.6 billion in accumulated losses, as the company cited “adverse market conditions, which are having a negative impact on the construction industry throughout the GCC.”

Earlier this year, however, Arabtec reported its first quarter of profitability after nine consecutive quarters of loss-making, with Dh17.6 million in net profit for the first quarter of 2017.

“While this is another step towards the turnaround of the group, there is still a lot more work to be done. The initial step reinforces our commitment to returning Arabtec to profitability and solidifies our strategic road map to achieving sustainability,” said Hamish Tyrwhitt, Arabtec’s group chief executive officer, in a statement at the time.

On Tuesday, Arabtec’s Tyrwhitt described the capital increase through the rights issue as an “important milestone” for the company that will help put it on track to reposition to “maintain profitability and develop a successful and sustainable future” for stakeholders.

The company had earlier said its recapitalisation programme will allow it to pursue growth opportunities and fund completion of ongoing projects. It also plans to dispose of non-core investments and focus on core competencies and key geographies.

Arabtec then plans to secure an annual backlog of new projects of at least Dh8 billion to Dh9 billion from 2018, according to plans announced earlier this year.

Arabtec share prices fell 1.47 per cent on Tuesday to reach Dh0.739.