Abu Dhabi conglomerate Al Jaber on track with $4.5bn deal for creditors

Al Jaber Group, which has interests in construction, engineering and marine services, is close to announcing a deal with creditors to complete a US$4.5billion restructuring.

Al Jaber's creditors include HSBC. Jeffrey E Biteng / The National

Al Jaber Group, the Abu Dhabi conglomerate with interests in construction, engineering and marine services, is set to announce a deal with creditors to complete a US$4.5 billion financial restructuring that has taken nearly three years to negotiate.

Bankers involved in the talks with about 20 creditors, speaking on condition of anonymity because the negotiations were private, said a deal to reschedule debts was "materially" complete, and an announcement could be expected "shortly".

Al Jaber is one of the biggest industrial groupings in the UAE, employing more than 50,000 people. It got into financial trouble in 2010 when it was unable to meet some repayment terms on loans.

The negotiations were complicated by the existence of different types of debt - secured and unsecured - which increased the overall liabilities of the group.

The secured portion, made up of both conventional and Islamic facilities, is believed to have amounted to about $2.5bn.

There were also big losses related to foreign currency hedging transactions, especially relating to Japanese yen, which fluctuated significantly at the time of the earthquake in Japan in 2011, soon after restructuring talks began.

Creditors include National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, HSBC, Royal Bank of Scotland and Union National Bank.

No terms of the settlement have been made public, but Al Jaber is likely to have to pay a higher rate of interest, over a longer period of time, than when the loans were taken out.

A banker said: "It was never an issue of solvency or liquidity, it was a rescheduling exercise. The company has the capacity and the cash flows to fund its liabilities, it was a matter of how quickly and at what rate they could do it.

"The ongoing business is a fabulous operation. They know how to do contracting, especially in the Gulf. It needed strong management and governance to protect it from the credit cycle. The big issue is the fact there is strong competition in the regional contracting market," he added.

A deal with creditors will allow Al Jaber to reopen credit lines and bid again for big contracts.

Government contracts in the region dried up following the global financial crisis. But last week Al Jaber won a Dh1.8bn contract to build luxury villas on Saadiyat Island in the UAE capital, an important indication that its financial condition is recovering.

A successful conclusion to the long-running restructuring would be another sign that UAE companies are tackling their debt issues. In Dubai, the financial unit Dubai Holding is said to be close to a deal with creditors, including the Government of Dubai, over $10bn of liabilities.

Moody's Investors Services, the credit rating agency, says 2014 will be a "pivotal" year for the UAE's financial policymakers, with some $22bn of debt maturing, including $20bn loaned to Dubai by Abu Dhabi entities at the height of the financial crisis in 2009-10.