Banks have refused to provide financing to a listed company that sought liquidity to distribute dividends to shareholders for the previous year. Instead, they stipulated that any banking facilities must be directed toward operational needs rather than dividend distributions.
A source confirmed that the rejection remains in place even if the company retains cash and issues bonus shares, as the funds raised must be considered part of its operating capital.
In light of the ongoing discussions about the financing process, the bank reviewing the application can assess the company’s intention behind seeking funding. This includes determining whether the financing is intended for purposes other than supporting existing business activities, such as seizing opportunities or expanding operations and business growth.
While many companies have successfully obtained facilities and approvals for letters of guarantee, non-cash facilities and demand lines of credit have been repeatedly rejected. This is primarily due to concerns about the company’s stable cash flow and profitability.
The banking facilities market is experiencing intense competition, but it remains concentrated among the most stable, profitable, and reliable entities. These companies are characterized by clear sources of cash flow and solid guarantees, which make them more attractive to lenders.
These types of companies are targeted by both local and foreign banks operating in the market, as well as by large banks with established financial relationships with companies outside the market.
Source: Al Jarida
