FILE PHOTO: A general view shows the area outside the Burj Khalifa, the world's tallest building, mostly deserted, after a curfew was imposed to prevent the spread of the coronavirus disease , in Dubai, United Arab Emirates March 25, 2020. REUTERS/Tarek Fahmy/File Photo
Arabtec had around $2.75 billion in total liabilities at the end of June, including almost $500 million in bank borrowing. The coronavirus, low oil prices and production cuts have battered the Gulf economies this year, but the collapse of construction giants like Arabtec and engineering group Drake & Scull International in the United Arab Emirates has deeper roots.
“You have a client who can fill you with work, make you become ‘galactic’ and then in one minute for technical or even political reasons, if the state decides to, or is forced to, for economic reasons, to suspend or delay projects, there’s no longer support. The whole house collapses, without foundations,” said an industry source, who didn’t wish to be named.
“Despite efforts to pursue legal and commercial entitlements and a restructuring of the company’s finances and operations, the situation in which Arabtec finds itself today is untenable,” said Arabtec’s chairman Waleed Al Mokarrab Al Muhairi, who is also deputy group chief executive at Mubadala. For Sachin Kerur, Middle East office managing partner at law firm Reed Smith, part of the problem is in the way contracts are awarded.