Dubai’s troubled Arabtec hires AlixPartners for review, say sources

Loss-making Dubai contractor Arabtec’s board has hired restructuring advisory firm AlixPartners to help it strengthen its capital structure and reform its business, three sources aware of the matter told Reuters on Sunday.

Among the tasks for AlixPartners will be to offer recommendations on how to boost the company’s funding and cash flow to support newly-awarded projects, the sources said, declining to be named as the information is not public.

The Gulf construction sector is in a marked slowdown after the slump in oil prices forced governments to rein in spending, compounding internal problems at Arabtec which has seen several board and management changes. The company has lost around 77 per cent of its share value since May 2014.

Arabtec declined to comment on AlixPartners’ appointment when contacted by Reuters on Sunday, but signalled the company is embarking on a new strategy that will be rolled out in 2016.

“It is a refined strategy, rather than a wholesale revamp,” said Steven Salo, Arabtec’s investor relations head. This will include increased focus on its core business, and sale of non-core assets.

AlixPartners did not respond to emails from Reuters.

Arabtec, which has recorded five continuous quarters of losses, is aiming to cut costs and this could include job cuts, its chairman Mohamed al-Rumaithi told reporters at its annual shareholder meeting on Wednesday.

Once an investor favourite, Arabtec’s shares soared as investors bet that the steadily increasing influence of Abu Dhabi state fund Aabar Investments — which owns 36 percent of the company — would lead to lucrative government contracts.

But schemes such as a $36bn project to build one million homes in Egypt or $6.1bn-worth of property for Aabar in the United Arab Emirates have yet to be realised.

Hasan Ismaik, a Jordanian businessman who took the helm at Arabtec in 2013, raised his stake as high as 28.85 per cent in 2014 but then quit as CEO in June that year after tensions with Aabar. His departure precipitated a fractious period which eventually led to him selling part of his stake to the Abu Dhabi fund.

Ismaik’s ownership in Arabtec currently stands at 11.81 per cent, according to Thomson Reuters data.

The contractor will go to banks for funding but there will be no bond issues for the time being, Rumaithi said on Wednesday, without elaborating.

Among the builder’s pipeline of projects includes a 1.7 billion dirham ($463 million) contract awarded last month by the UAE federal government to build 1,100 houses in the eastern emirate of Fujairah.