The UAE-based contractor Habtoor Leighton Group (HLG) owes its Australian partner A$1.2 billion (Dh3.13bn) even as it received an equity injection of A$33.5 million from shareholders last year.
HLG was meant to be “IPO-ready by 2016”, according to previous statements made by its partners. However, newly filed accounts by co-owner Cimic Group, formerly Leighton Contractors, show that HLG still has liabilities of almost A$1.2bn in receivables, letters of credit, guarantees and shareholder loans.
Cimic owns 45 per cent of HLG, and it said the carrying value of its investment increased to A$444.7m in 2015 from $383.4m.
These gains were largely a result of a stronger dollar, which added A$42.1m and the $33.5m equity injection from the partners. Cimic initially paid A$870m for its stake in September 2007.
The accounts show that A$726.3m of loans mature in September 2017, but these loans are subordinate to debts owed to other, external funders. On top of this, they have accrued a further A$116.4m of unpaid interest.
This quantum of debt seems unlikely to be repaid from income generated by HLG’s own activities. The accounts show that although HLG’s revenue climbed by 56 per cent in 2015 to A$1.2bn, pre-tax profit fell by 38 per cent to A$17.9m.
The company did not give any indication on whether it was still pursuing its IPO plans and declined to comment when contacted by The National.
The remaining 55 per cent share of HLG is owned by Dubai-based Al Habtoor Group. In November, its chairman Khalaf Al Habtoor reportedly told the Al Arabiya network that several local and international firms were interested in acquiring it. It also declined to comment on its plans for HLG.
According to its website, HLG employs more than 21,000 people in the UAE, Oman, Qatar and Saudi Arabia. It has a project pipeline of A$5.3bn.
Selling or floating a stake in such a major, Middle East-focused construction company may prove to be challenging in the current environment.
The Tunisian broker AlphaMena’s index of five quoted Middle East contractors, four of whom operate in the GCC, fell by 81 per cent in value from its peak in May 2014 to the end of 2015.
Moreover, new research from the credit rating agency S&P states that funding for infrastructure projects required by Gulf governments is likely to be severely constrained as a result of lower oil prices and tighter bank liquidity.
It is projecting a funding gap of about US$270bn between the spending required by Gulf sovereigns in the run-up to 2019 and the value of projects awarded.
It estimates that GCC countries require US$604bn of capital spending – of which US$100bn will be on infrastructure projects, but that states are only likely to invest US$330bn, of which $50bn will be on infrastructure.
“This is one reason why Gulf countries are starting to look at alternatives such as public-private partnerships,” said the S&P credit analyst Karim Nassif.
Follow The National's Business section on Twitter