DUBAI: Shareholders of United Arab Emirates-based Arabtec Holding PJSC voted to dissolve the debt-laden construction firm, in a move that is likely to impact thousands of jobs as well as scores of suppliers and sub-contractors in the region.
Construction companies that sprung 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.
“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.
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.
Since peaking in 2014, Arabtec has fallen behind regional, emerging markets peers
Abu Dhabi-based Arabtec, which is backed by sovereign wealth fund Mubadala, had called for a shareholders’ meeting after posting US$216 million in first-half losses.
It cited tight liquidity and limited new projects, and said it was seeking an adviser for a debt restructuring.
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 30 billion dirhams (US$8.17 billion) at its peak in 2014 and is now worth 795 million dirhams, with the stock down 60% 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 US$1.23 billion write off on its 45% 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 5 billion dirhams in receivables, dues and advances and 1.8 billion dirhams 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.