Saudi contractor Mohammad Al-Mojil Group's (MMG) board had approved a recovery plan that use most of its existing capital base to pay off debts and new cash raised through a share issue, it said on Sunday.

The firm, which got into difficulty after over-extending itself trying to take advantage of a boom in construction in the kingdom, has not traded on the Saudi bourse since July 2012, when its shares were suspended by the regulator after breaching rules relating to accumulated losses.

MMG said in September its accumulated losses for the period ending Aug. 31 stood at 2.689 billion riyals ($717.1 million), equivalent to 215 percent of its paid-up capital. Saudi shares are suspended once losses pass 75 percent of capital.

Under the plan approved at a board meeting on Thursday, MMG's capital will be cut from 1.25 billion riyals to 125 million riyals, creating one share for every 10 shares currently possessed, it said in a bourse filing.

Such an accountancy technique will allow the company to effectively write off some of its accumulated losses.

At a later stage, it said, its board will recommend increasing the capital again via a rights issue and/or through preferred shares to help it restructure its operations.

Also part of the plan would be a "significant reduction" in the amount payable to the lenders in respect of outstanding sharia-compliant loan facilities, it said.

All these steps would be subject to the outcome of negotiations with potential new investors, existing lenders and regulatory approval, the statement said.

Should the restructuring go ahead, it is hoped that all legacy projects would be completed in the first quarter of 2015, allowing the business to return to profitability in subsequent quarters as it takes on new business opportunities, MMG added.