In one of Abu Dhabi's largest debt restructurings the Al Jaber Group is mulling selling some of its prized assets.
Al Jaber weighs asset sale in debt restructure
Al Jaber Group, the family-owned contracting conglomerate, is considering the sale of certain assets as part of a restructuring agreement being discussed with lenders, senior sources said.
The sales could include properties as well as a heavy lift business in Singapore as Al Jaber works to reschedule its obligations.
The group announced in December that it had "approached a syndication of lenders with a view of improving the terms of its facilities" because of the "widespread liquidity crises" in the global markets. The company, which said it had 50,000 employees, derived much of its business from contracts with the Government and government-related companies to build infrastructure.
Al Jaber said yesterday it had appointed in January a co-ordinating committee of its lenders, chaired by National Bank of Abu Dhabi, to negotiate over the rescheduling of its debts.
The committee also includes Abu Dhabi Commercial Bank, HSBC, Royal Bank of Scotland and Union National Bank. It is being advised by Allen & Overy and PricewaterhouseCoopers.
The group said it had an order book in excess of Dh17 billion (US$4.62bn) in the GCC and had hired Rothschild, KPMG and Norton Rose to advise on its restructuring.
The statement came just hours after Fatima al Jaber, the chief operating officer of the company, spoke about the challenging economic environment in the region in a panel discussion at the CityBuild conference at the Abu Dhabi National Exhibition Centre.
"The government flow of projects slowed down in 2010," Ms al Jaber said. "We're not looking for growth, except maybe 5 per cent. We're looking for stabilisation."
She said "some clients haven't been paying progressively" last year.
"That puts a burden on the company itself," Ms al Jaber said. "It puts more pressure on you as a corporation."
Al Jaber was focusing on "strategic types of projects" in Abu Dhabi this year, she said.
The group has Dh1.39bn of loans maturing this year, according to Bloomberg News data, with Dh1.46bn due in 2013. The total debts that are under negotiation have yet to be disclosed.
One company that is being examined within the umbrella of Al Jaber is Al Jaber Aviation, a private airline business that was built from scratch with considerable debt. Al Jaber Aviation took out $42 million in loans in November 2009 to buy two Embraer Legacy 600 private jets.
An exacerbating factor for Al Jaber has been the presence of several yen-denominated loans on its books, which hurt the company when the Japanese currency rose against the dollar last year. The dirham is pegged to the dollar.
While payments from developers and other entities have been slow or in some cases non-existent over the past two years, contractors have also been hit by more difficult borrowing criteria.
Banks have shifted away from property and construction, which has reduced many companies' ability to obtain guarantees and performance bonds that have become a requirement to gain work.
Construction executives at the CityBuild conference yesterday said profit margins had shrunk and contracts had become more "biased" after the slowdown in the regional property market.
Even the strategy of diversifying into other countries throughout the Middle East and North Africa region was no longer sound, they said, considering the unrest that has swept the region.
But considering its oil reserves and ambitious plans, the UAE remained a country with opportunities.
"It has been a tough 12 months and it will probably never be what it was" in the UAE, said Laurie Voyer, the chief executive of Al Habtoor Leighton Group. "But we still think it's a sound area, with economic returns to be made."
* With additional reporting by Farah Halime