x Abu Dhabi, UAE Thursday 20 July 2017

Builder Hastie collapses, risking 2,000 jobs in Middle East

Hastie Group, the engineering company which has operations in the Middle East, including the UAE, went into administration this week with around US$492.1 million in debt.

Hastie Group, which filed for administration this week, has worked on projects worth billions of dirhams in the UAE, including Abu Dhabi's Dalma Mall, shown here. Lee Hoagland/ The National
Hastie Group, which filed for administration this week, has worked on projects worth billions of dirhams in the UAE, including Abu Dhabi's Dalma Mall, shown here. Lee Hoagland/ The National

A major Australian builder with contracts across the Emirates has gone bust, threatening 2,000 jobs throughout the Middle East.

Yesterday morning creditors gathered at the Dubai office of Hastie Group in Al Quoz, hoping to learn whether they would be paid.

Hastie worked on projects worth billions of dirhams in the Gulf, including the new campus of Zayed University and Dalma Mall, both in Abu Dhabi.

Problem contracts in the region are understood to be one of the factors behind the company’s collapse.

Administrators from PPB Advisory were called in this week to run the company and more than 40 of its units.

“Our priority is to help facilitate re-employment of the workers and as such we continue to hold discussions with main contractors, developers and builders,” PPB said in response to questions from The National.

With more than 7,000 employees worldwide, Hastie Group grew to become a global name in mechanical and electrical contracting.

About 50 suppliers and subcontractors went to the company’s Dubai office yesterday seeking paymentsfor projects around the UAE.

“This came out of the blue,” said one equipment supplier working on a Hastie project in Downtown Burj Khalifa. “I don’t know if we’ll get paid.”

It may be more difficult for UAE creditors to recoup money owed than it will be for their counterparts in Australia, lawyers say.

“There may not be much there,” said Abdul Aziz Al Yaqout, the regional managing partner at the law firm DLA Piper Middle East. “There may be corporate guarantees of the parent company for debts of its subsidiaries. But then the third party would have to go to Australia and file for its claims under that guarantee before the Australian courts.”

In its 2011 shareholder review, Hastie said that collection of cash in the Middle East had been a major challenge.

Employees received a memo on Tuesday telling them they had been “stood down” without pay immediately because Hastie had insufficient funds to meet its payroll and operational costs.

This capped a week of drama at the company, which last Friday reported it had discovered accounting irregularities in Australia totalling about A$20 million (Dh71.7m) that it blamed on a rogue employee.

Hastie had been involved in a legal row with Dutco Balfour Beatty in Dubai over the construction of a Novotel hotel in Al Barsha.

Dutco Balfour Beatty had earlier ended its contract with the Australian firm and had called for payment of bank guarantees of some Dh23.5 million (US$6.3m). Hastie was in the process of applying to the Dubai courts for an injunction when the company folded.

Its collapse has highlighted the need for reform of the UAE’s insolvency regime, which many lawyers argue is skewed towards liquidating assets instead of preserving them.

“There is a big necessity to revamp the insolvency and bankruptcy laws throughout the region,” said Mr Al Yaqout. “In the past, the focus was on liquidating companies whereas now the main focus is to protect the value of assets and try to save the company and its operations for the employees, for the creditors, but also for the shareholders.”

In the Emirates, creditors of failed companies can make their claims before the court, which can in turn appoint a bankruptcy administrator to establish the validity of the claims. The administrator can then liquidate the company and distribute the proceeds of whatever remains to its creditors. But the process may be complicated by what guarantees exist between the local company and its parent.

“You need to carefully check the relationship between the local company you are trading with and the international company that has gone into administration, said Sachin Kerur who runs the Dubai office of Pinsent Masons, an international law firm.

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