Contractors make progress rebuilding balance sheets

Arabtec says the Dh1.5 billion raised will help it to finish projects, execute its turnaround plan and target growth opportunities.

Arabtec said that it had completed a Dh1.5 billion rights issue, which is the first step of its two-part recapitalisation programme. Steve Crisp / Reuters

The UAE’s two major listed contracting companies both announced that they had made progress with recapitalisation exercises aimed at rebuilding their balance sheets on Tuesday.

Arabtec said that it had completed a Dh1.5 billion rights issue, which is the first step of its two-part recapitalisation programme.

The company said that the issue had been fully subscribed, and takes the size of its share base from 4.6 billion to 6.1 billion. The new shares are due to begin trading on the Dubai Financial Market tomorrow, subject to approval. Documents filed from the company’s board meeting yesterday (19 June) also show that the board approved the second step of the recapitalisation, giving its chief executive authorisation to take the necessary steps to reduce the size of its capital base by just over 4.6 billion shares, which will help it to wipe out liabilities caused by historic losses.

In a statement, the group chief executive Hamish Tyrwhitt said: “This marks a very important milestone for Arabtec Holding and signifies the ongoing support of our shareholders, both new and existing, who have not only invested in the company, but in the people of the company and their vision and mission for the future.

“I would like to thank our shareholders for their continuous support which has helped put us on track to reposition the Group to maintain profitability and develop a successful and sustainable future for all our stakeholders.”

The rights issue was effectively underwritten by Arabtec’s biggest shareholder, Aabar Investments, which had pledged to mop up any shares from the issue that other shareholders decided to pass up.

The company said that the money will be used to help it finish projects, support the management’s turnaround plan and to provide it with the finances to pursue growth opportunities.

Meanwhile, Drake & Scull announced that it had begun final preparations to gain approval from the Securities & Commodities Authority to undertake a capital reduction which will see 75 per cent of its shares cancelled to extinguish Dh1.71 billion of historic losses. Following this, Tabarak Investment will inject Dh500m of capital into the business. If the measures are approved, Tabarak Investment will own a majority stake in the company after the transactions are completed, which is expected to be at the end of the third quarter of 2017.

Feras Kalthoum, the acting chief financial officer at Drake & Scull, said: “This is a major milestone in our turnaround strategy announced at the outset of the fiscal year 2017.

“We are proceeding with the preparations at full speed to secure SCA’s approval and to initiate the share capital reduction to strengthen our balance sheet.

“I am confident that by the end of Q3 2017 we will complete our programme and we will generate substantial liquidity to reinvigorate our operations.”

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