Dubai: Arabtec Holding and some of its subsidiaries have formally filed for liquidation, which marks a significant moment for the UAE's construction sector. This follows the approval a majority of shareholders had given to the Board to pursue this option after the company failed to secure new funds.
Now follows the months of legal processes that will see the company wind down its operations, and which will include paying off creditors and subcontractors. It is for the future to determine how much each of them will be paid.
The company's liabilities - those to banks and other creditors - are estimated at over Dh18 billion. The market also talks about secondary obligations of another Dh15 billion or thereabouts. Arabtec is expected to provide a full breakdown of these numbers.
Asset stripping
But the market is already speculating whether Arabtec has got enough inbuilt assets to pay off these obligations. Plus, if the company is not in a position to mobilise further at any of its ongoing projects, it means those funds too will not be coming in.
Subcontractors associated with the company say they are already feeling the pinch from what’s owed to them. And that not having these funds means they are in no fit position to take on new projects.
“The impact on subcontractor cashflows is severe – some interim solutions need to be put into place to prevent these businesses biting the dust,” said a construction industry source. “Legal processes take too long… and time is not what these businesses cannot afford.”
Takeover?
Arabtec’s ongoing projects, at least some of them, could be farmed out to other contractors. Subcontractors are hopeful this will happen at the earliest.
“Banks will be squeamish about taking exposures in projects when the main contractor is in liquidation,” the source added. “For the construction industry and project owners, these add to the uncertainty.”
Can some entity come in to rescue Arabtec? Or parts of it that is still seen as having value?
Again, there has been lots of talk, and it was hoped that such a systemically important entity that built Burj Khalifa and Louvre Abu Dhabi will get some suitor.
So far, it has not come to that. The formal filing of liquidation papers might yet change that.
