Arabtec appoints advisers to sell subsidiaries ahead of liquidation

The company has hired consultants to offload Target Engineering and Arabtec Engineering Services

Arabtec plans to sell its two subsidiaries including Target Engineering and Arabtec Engineering Services as it faces liquidation amid financial difficulties. Silvia Razgova / The National

Arabtec is planning to sell its two subsidiaries Target Engineering and Arabtec Engineering Services (AES) as the construction giant faces liquidation.

The move will help the company in "protecting the value of liquidation assets in the interest of all of its creditors", Arabtec said in a statement to the Dubai Financial Market on Wednesday.

The company's  shareholders in September authorised the board to file for liquidation due to its untenable financial position.

“In the event a sale of any of the company’s subsidiaries or their assets is agreed, any such sale will be subject to the approvals and ratifications as may be required under applicable UAE laws,” the contractor said.

Arabtec has appointed corporate advisory firm deNovo to advise on the potential sale of Target while Lumina Capital will advise on the sale of AES.

The company, which started its operations in 1975, also has other subsidiaries including Gulf Steel Industries, Emirates Falcon Electromechanical company, Austrian Arabian Readymix Concrete company and Arabtec Precast.

Arabtec, which has built some ionic projects including the Louvre Abu Dhabi and the world’s tallest skyscraper Burj Khalifa in Dubai, reported a net loss of Dh788 million ($214.5m) in the first half of last year as revenue for the period fell 28 per cent to Dh3.02 billion.

As of June 30, the company owed about Dh1.8bn to banks and more than Dh5.3bn to trade creditors. It had total liabilities of Dh10.14bn and assets of Dh9.79bn, according to its half-year financial statement.

“In recent years, limited liquidity in the construction sector has impacted the progress of Arabtec’s projects and this has been exacerbated by the effects of Covid-19," the company's chairman, Waleed Al Muhairi, said in October.

"Despite efforts to pursue legal and commercial entitlements and a restructuring of the company’s finances and operations, the situation in which Arabtec finds itself today is untenable,” he added.

Construction companies in the UAE have faced headwinds as the property market slowed in the wake of a three-year oil price drop that began in 2014. The coronavirus pandemic further compounded the problem as work was slowed on some sites to maintain social distancing and new projects were delayed or cancelled.