Burj Khalifa builder Arabtec set to fall into liquidation
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Burj Khalifa builder Arabtec set to fall into liquidation

Burj Khalifa builder Arabtec set to fall into liquidation

It was valued at about Dhs30bn at its peak in 2014 and is now worth Dhs795m


Shareholders of United Arab Emirates-based Arabtec Holding, which helped build the world’s tallest skyscraper, voted to dissolve the debt-laden firm in a move likely to threaten thousands of jobs and scores of suppliers and sub-contractors in the Gulf region.

Construction companies that sprang up more than a decade ago as a building bonanza swept Dubai and much of the Gulf are facing a reckoning as governments pull back on spending.

Arabtec’s board will have a maximum of two months “to allow for discussions with the main stakeholders before a liquidation application may be submitted to the competent courts,” the company said in an e-mailed statement.

The impact on jobs would be “substantial” since the company has about 40,000 employees, Jaap Meijer, head of equity research at Arqaam Capital, said in an interview with Bloomberg Television.

“After considering a number of strategic options, the shareholders of Arabtec Holding have voted to discontinue with the group and dissolve it due to its untenable financial situation,” a spokesperson said.

Abu Dhabi-based Arabtec, which is backed by sovereign wealth fund Mubadala, had called for a shareholders’ meeting after posting $216m in first-half losses. It cited tight liquidity and limited new projects, and said it was seeking an adviser for a debt revamp. Restructuring firm Alix Partners prepared a financial analysis that included a number of strategic alternatives, the company said.

The liquidation plan is meant “to maximise value for stakeholders through a controlled and efficient programme,” Arabtec chairman Waleed Al Muhairi wrote. “Our current priority is to ensure that everyone directly affected by this decision is treated fairly during this challenging time.”

Louvre, Burj Khalifa
Established in 1975, the company has played a role in building some of the country’s best-known landmarks such as the Louvre in Abu Dhabi and the Burj Khalifa, the world’s tallest building, in Dubai.

It was valued at about Dhs30bn ($8.17bn) at its peak in 2014 and is now worth Dhs795m, with the stock down 60 per cent this year alone.

Construction firms in the region have struggled for years with project delays and thin profit margins – in January, Australia’s CIMIC Group took a $1.23bn write off on its 45 per cent stake in BIC Contracting and exited the Middle East.

Harshjit Oza, an equity analyst and head of research at Shuaa Securities, said Arabtec has about Dhs5bn in receivables, dues and advances and Dhs1.8bn in outstanding debt, and warned that banks and creditors would find it difficult to recover losses from liquidation.

“Undoubtedly, this will have a negative impact on the economy and jobs aside from the exposure of the banks,” he said.

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