dubai feb 4 reuters  creditors of saudi arabias azmeel contracting co one of the kingdoms five biggest builders have approved the restructuring of a 773 billion riyal 206 billion debt pile mainly through an issuance of perpetual islamic bonds its chief restructuring officer said on friday saudi arabias construction sector has faced myriad problems in recent years with many firms falling casualty amid late payments from the government rising costs and swings in oil prices that impact statebacked infrastructure projects about 88 of azmeels creditors including 90 of banks and 75 of trade creditors voted in favour of the restructuring plan which will give them the option to sell their exposure in the secondary market should they choose to do so hisham ashour azmeels chief restructuring officer and managing director at haykala investment managers told reuters in october 2019 azmeel was one of the first saudi companies to enter formal bankruptcy proceedings under a law that came into effect in 2018 part of broader saudi plans to attract foreign investment azmeels liquidity crunch came to a head in 2019 when clients some governmentrelated entities and some in the private sector made late payments ashour said that led to accumulating debt that reached 773 billion riyals including unpaid or late salaries and unpaid suppliers and an equity deficit of 2 billion riyals the companys workforce has shrunk to about 2000 from about 35000 in 20172018 the idea of a contracting company having tens of thousands of staff is not feasible anymore ashour said the company is probably going to be looking at a model where they maintain project management and technical capabilities inhouse and outsource and subcontract as much as they can the debt comprises 54 billion riyals in bank debt  of which 2 billion riyals are unfunded bank guarantees 21 billion riyals in claims from trade creditors and 230 million riyals in employee and government dues it will be restructured through the issuance of 7 billion riyals in perpetual sukuk about 92 of the total liabilities with the remaining roughly 8 as residual debt  secured against azmeel assets like equipment and real estate it will have strict covenants to ensure company compliance with the terms of the restructuring plan ashour said the sukuk for which a profit rate has yet to be determined are expected early in the second quarter ashour said azmeel is in talks with saudi lenders to arrange the deal the company envisions repaying the sukuk over 11 years including a oneyear grace period about half of the planned sukuk will have personal guarantees a cash sweep mechanism allows for excess cash to be used for earlier repayment ashour said meaning any potential upside in the business could accelerate the timeline the restructuring appeals to banks as it gives them an option to exit while also clearing the companys balance sheet allowing it to bid for new projects with a healthier credit standing creditors with the biggest exposures include arab national bank alrajhi bank banque saudi fransi saudi british bank bank aljazira saudi national bank bank albilad gulf international bank and emirates nbd ashour said king  spalding advised azmeel and latham  watkins advised the creditors on the restructuring this will save jobs and will increase economic asset recovery for banks and shareholders its a winwin ashour said