In an official statement of the company, Arabtec clarified that the financial situation is unstable and faces challenges that lead to the issue of liquidation being the best solution for all parties.
The decision, which came out at the general meeting on the first of October, came after investors’ delay and anticipation, which came unexpectedly in a heavy surprise to liquidate one of the largest UAE companies specialized in building contracting.
The company used a special financial analysis from a financial consultancy firm “Alex Partners” to study the internal situation of the company after the capital eroded for the second time in a short time and accumulated losses accounted for more than 97 percent of the capital.
Immediately after the official issuance of the decision, Waleed Al-Muqarrab Al-Muhairi, Chairman of the Board of Directors of Arabtec Holding Company, attributed the main reason for the decision, to the contraction of the real estate and construction sector, which witnessed a remarkable decline, especially with the spread of the Corona virus, which made the matter worse.
For his part, Waddah Al-Taha, a financial market analyst, commented that the company’s current liabilities, which are obligations due within a year or less, are equivalent to 9.12 billion dirhams, which represents tremendous pressure on the company.
On the other hand, Waddah Al-Taha indicated that there is still a glimmer of hope in two factors, the first of which is the presence of a professional strategic investor, and the second is the restructuring of the debt shrinkage, especially as it is the first case of its kind in the UAE.
With regard to legal responsibility, the financial analyst emphasized that Article 304 of the Companies Law stipulates that no partner or shareholder is entitled upon dissolution or liquidation of the company, a share of its capital unless its debts are paid.
He noted that it is difficult to answer many questions unless the company answers them directly, as it is not possible to download everything that happened to market conditions.
Waddah Al-Taha explained that any liquidation process means selling the company’s assets to pay off its obligations and distributing what remains after the obligations are paid to the shareholders in proportion to the number of shares.
He continued: By looking at the situation in Arabtec according to the last published budget on June 30th, it indicates that liabilities (liabilities) are greater than assets (assets).
For his part, Ziad Makhzoumi, former chief financial officer of Arabtec Holding, said in press statements that there are many factors that led to the current situation of the company, most notably the weakness that afflicted the real estate sector, and its failure to focus only on its specialization in contracting.
He pointed to the reasons that have existed for several years without a radical solution, including the lack of experience and efficiency of the successive administrations that succeeded them, as the financial management of projects was unable to control pricing, cost and collection.
Makhzoumi expected that the liquidation decision would negatively affect both lenders and suppliers, pointing out that the current contracting sector situation is not conducive to liquidation, with the difficulty of selling assets and equipment at fair prices.
The former chief financial officer of the company believed that it would be better to experience restructuring and increase its focus on its specialization, which could contribute to raising its value.
Muhammad Ali Yassin, CEO of Strategies and Customers at Abu Dhabi Capital Ltd., pointed out, in media statements, that Arabtec’s problems date back to 2014, when the company was overspending, and that saving the company from liquidation would have required raising the capital from 1.5 billion currently to 5.3 billion. Dirhams.
He preferred that Arabtec shares remain suspended from trading until the picture becomes clearer to protect investors, indicating that the problem lies in allocations to local banks, as they will be in the form of guarantees for projects under delivery or other in-kind guarantees, which may put pressure on the UAE banking sector.
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