Arabtec Holding to proceed with liquidation and bankruptcy plan

Arabtec Holding said on Monday that it will go ahead with its earlier plan to file for bankruptcy and liquidation after shareholders did not agree for the company to continue its existing business and seek restructuring.

The statement came after a shareholder meeting earlier on Monday discussed a proposal from a group of investors to reverse a decision made in September to file for liquidation.

“The board has concluded that it is no longer tenable for the company to continue operating outside of a formal insolvency process,” Arabtec said in an email.

“... it is in the best interests of the company’s stakeholders that the company be placed into an insolvent liquidation (subject to court approval) at the earliest opportunity.”

Shareholders, including Abu Dhabi state fund Mubadala Investment Co, voted in September to liquidate Arabtec after losses deepened due to the coronavirus crisis.

The Dubai-based construction firm said no application will be made to the courts in respect of any of the company’s other subsidiaries.

Earlier over five per cent shareholders of construction major Arabtec have asked to reverse an earlier decision made in September to file for bankruptcy and liquidation.

The company’s shareholders met at a general assembly meeting on Monday to approve the continuity and restructure the troubled firm, it said in a statement to Dubai Financial Market, where it is listed.

In September, Arabtec shareholders authorised the board to file for liquidation due to its untenable financial position due to Covid-19.

Shareholders, including Abu Dhabi state fund Mubadala Investment Co, voted in September to liquidate Arabtec after losses deepened due to the coronavirus crisis.

Arabtec suffered a first half loss of $216.18 million, piling up accumulated losses of around $400 million. As a result, the company has reportedly laid off more than 8,000 people.

Construction sector was also badly hit due to slowdown, delays in payments and credit crunch following the outbreak of the pandemic.

“It seems that these points have been raised by a group of investors. The fact that they’re being discussed at the general assembly doesn’t mean there’s a change of heart, it means that these points will be voted on,” said Mohammed Ali Yasin, chief strategy officer at Al Dhabi Capital Ltd, told Reuters.

“And if the two major shareholders who voted on the liquidation in the last two shareholder meetings, vote against these two points, then those points will be voted down (not executed) and the process of liquidation that was started will continue,” he added.

Arun Leslie John, chief market analyst at Century Financial, said as shocking as Arabtec’s decision to liquidate the company is its latest volte-face, cancelling the liquidation.

“Apparently, it was the general assembly meeting today, and it seems a majority of shareholders did not consent to the decision. And to top it, the meeting today also approved of a filing of a claim of liability against board members and auditors. It authorised some shareholders to take necessary actions in this regard. Shareholders don’t seem to take things lying down, and that is a warning for managements in other troubled companies also. Perform or perish,” said John.

— with inputs from Reuters

— waheedabbas@khaleejtimes.com

• Dubai