Dubai: Contractors and those in allied businesses are starting to tally how much an Arabtec liquidation is going to cost them. The interiors fitout company, Depa, says that Arabtec, which late last week said its shareholders have recommended dissolving it, says it is owed Dh82 million.
"Depa’s exposure to the Arabtec Group remained at a similar level as at 30 September," Depa added in a statement. "To the extent that Arabtec or member(s) of its group enter liquidation, this would likely have a material impact on Depa’s financial performance and financial position."
Meanwhile, Arabtec confirmed that it will hold a board of directors meeting on October 7 to review all procedures to implement the decisions taken at the general assembly.
Depa's case is an exceptional one, because Arabtec holds 24.18 per cent in the enity and making the contractor the second largest shareholder. Even then, Depa reckons this will not prove a major concern.
"The majority of Depa’s shares are held by individuals, funds and institutions not connected with Arabtec," it said in the statement. "Arabtec has a minority representation on the board of directors of Depa. Depa awaits clarity on the outcome of Arabtec’s discussions and any liquidation application that may be submitted to the competent courts so as to determine the likely impact to Depa."
Depa continues to pursue its pipeline of opportunities and deliver on its secured projects. Management is implementing Depa’s group-wide transformation and restructuring programme and continues to take action to reduce Depa’s cost base to protect its financial position, in addition to the continuation of its non-core asset disposal programme.
A period of high uncertainty
The same processes are being played out at other contractors with exposures to Arabtec. Sources say that in the next four weeks or so, the full extent of what Arabtec owes its subcontractors and other entities will be known.
The industry is also keeping a close watch on what could happen on Arabtec’s existing projects. Will the promoters of these now insist that another contractor should be brought on board to complete them? Or will they stick to Arabtec, in the hope that liquidation is more of a technical issue and that on the ground operations will continue?
“As long as short- to medium-term project-specific funds are available to Arabtec, project activity should continue,” said a subcontractor who has worked closely with Arabtec in the past. “And there aren’t that many construction companies that can match Arabtec’s scale and skills in the UAE – some of those international contractors that had it have exited the market.”