AlixPartners to liquidate assets of Burj Khalifa and Louvre builder

27 October 2020 Consultancy-me.com

Arabtec – a company most known for its role in the construction of world’s tallest building Burj Khalifa and the iconic Louvre replica in Abu Dhabi – has gone into liquidation. The Dubai-based company is working with consultants from AlixPartners on an asset liquidation plan.

The decision to liquidate was taken at an Arabtec shareholder meeting at the end of last month. Losses of more than $200 million compounded a drop of more than 60% in share value since the start of this year to leave the company’s finances in shambles. Arabtec’s current valuation of more than $200 million is a shocking one-thirtieth of its $8 billion plus peak value back in 2014.

UAE law dictates that companies need to take a call on their future if their losses amount to half of their issued share capital, which it did for Arabtec. Prior to the decisive meeting, global restructuring specialists AlixPartners were consulted to identify potential options for Arabtec – a process that has resulted in the decision to liquidate.

AlixPartners to liquidate assets of Burj Khalifa and Louvre builder

“After considering a number of strategic options, the shareholders of Arabtec Holding have voted to discontinue with the group and dissolve it due to its untenable financial situation,” said an Arabtec Spokesperson. An email seen by Gulf Business revealed that Shareholders have given the board a maximum of two months “to allow for discussions with the main stakeholders before a liquidation application may be submitted to the competent courts.”

The board has also been authorised to appoint AlixPartners to manage the liquidation process itself, drawing on its existing analysis of Arabtec finances last month. Matthew Wilde – a two-decade restructuring veteran who took over as the lead for AlixPartners’ Middle East restructuring practice in June – is in consideration for the role, although the selection has been left to the board’s discretion.

Experts suggest that the liquidation process will inevitably lead to job cuts, with Arabtec’s 40,000-strong headcount coming under risk. As explained by Arabtec Chairman Waleed Al Muhari in the email, the plan aims to “maximise value for stakeholders through a controlled and efficient programme. Our current priority is to ensure that everyone directly affected by this decision is treated fairly during this challenging time.”

Arabtec’s downfall

Once a shining jewel in the Middle East’s construction landscape – valued at more than $8 billion and responsible for the world’s tallest building – Arabtec has joined a host of other construction players in the region to rapidly fall of its perch. Several factors are at play here.

For one, experts have long suggested that the Middle East construction landscape is past its prime. More than a decade ago, key cities such as Dubai, Abu Dhabi, Riyadh and Doha were on substantial modernising drives, with buildings springing up everywhere. The Middle East was a global hotspot for construction investments. Now developed into key economic centres, these citiies have seen a slowdown in construction activity.

Then there is the more immediate impact of Covid-19, which has been nothing short of devastating for construction in the region. Disrupted supply chains caused raw material delays, packed construction sites became infection risks, and a global spending crunch caused most projects to be put on hold or cancelled altogether. Also in the mix has been a 70% crash in oil prices this year – described by some as the worst oil crash in history.

For Arabtec and the construction industry, there are few chances of survival. Reports suggest that most construction players are either liquidating, exiting the Middle East or restructuring their debt in a bid for survival. Arabtec has chosen to shut shop, and AlixPartners will help with the process.