Khaleej Times - Arabtec shareholders at a crossroads over liquidation

Devesh Mamtani, Special to Khaleej Times,Dated 09 Oct 2020

Nothing would left for the shareholders of construction firm Arabtec after it announced liquidation as its net asset value (NAV) is negative.

Total assets of Arabtec stand at Dh7.379 billion while total liabilities are Dh10.137 billion. "For all practical purposes, the NAV of Arabtec seems negative and shareholders are likely to see their shares expire worthless," said Devesh Mamtani, chief market strategist at Century Financial.

He said Arabtec shareholders are not likely to get much from its assets as their market value will be much lower in case of a bulk sale.

On September 30, Arabtec Holding shareholders approved the board of director's plan to file for liquidation due to heavy financial losses following the outbreak of Covid-19.

"Unfortunately, against a backdrop of adverse market conditions, we regret to inform you that Arabtec shareholders voted to adopt a plan of liquidation and dissolution due to the company's untenable financial situation," the company said in a statement.

Arabtec has been involved in some of the UAE's landmark projects including the Louvre Museum in Abu Dhabi, Dubai's Burj Khalifa, the Dubai International Airport expansion project and Al Maktoum International Airport, among others.

It posted a Dh774.5 million net loss in 2019, citing weaker income from its construction business amid tighter liquidity in the construction sector.

Century Financial said the book value of investment property is shown as Dh593 million, but the land in Dubai with a carrying value of Dh568 million is pledged against a borrowing from Mashreq bank amounting to Dh353 million.

Apart from investment properties, the total value of property, plant and equipment (PPE) is shown at Dh488 million. The largest components among PPE are labour camps and buildings with a value of Dh179 million, and plant, machinery and office equipment at Dh161 million.

"Among the non-current assets, it is not sure how much of the trade receivables is recoverable, especially in the context of the liquidation. Companies like Damac, Emaar might use the legal option if their projects stop and might settle their accounts immediately," Mamtani added.