x Abu Dhabi, UAETuesday 16 January 2018

Al Habtoor Group owed Dh4bn by its clients

Khalaf al Habtoor, the company's chairman, says he has been trying to collect payments for more than a year: 'Most of the clients have the money. I don't know why they don't pay.'

The head of Al Habtoor Group, one of the UAE's largest family businesses, says his group is owed more than Dh4 billion (US$1.08bn) for work long since finished, a frustration that he attributes less to the financial crisis than changes in business culture.

Khalaf al Habtoor, the chairman of the group, said his company has been trying for more than a year to collect payment for a number of completed projects.

"Most of [the clients] have the money. I don't know why they don't pay," he said. "There are only promises and no results on that promise. One day, if they don't pay we will have no choice but to take it to arbitration. What can we do? We need billions."

Mr al Habtoor's company built a number of hospitals, schools and hotels around the Emirates, including the Burj Al Arab hotel in Dubai. He declined to name specific projects for which his firm has not been paid but said they involved some of the biggest companies in the region and were "in excess of Dh4bn."

Family businesses play a huge role in the GCC economy, accounting for almost half of all private-sector employment and 40 per cent of non-oil GDP, according to the consultancy Booz & Company. But their operations are generally opaque, as private companies are not required to release financial statements and their leaders typically offer few details about their performances.

The news last month that Al Jaber Group was restructuring debts of up to Dh6bn raised some concerns that other family conglomerates could also be under stress. But analysts say most indications are that family businesses fared better than other companies in the region during the financial crisis, in part because of a conservative approach towards balance sheets and in part because they are widely diversified across a range of sectors.

This matches the global trend, where the Credit Suisse Family Index outpaced non-family firms by more than 15 per cent since 2005.

But analysts also say that UAE family businesses are at a critical point in their development, needing to manage growth carefully and develop sustainable long-term strategies.

"It is almost like a person that has grown very fast and kept the same clothes. The seams are starting to break," said Ahmed Youssef, a principal with Booz & Company in Dubai.

To that end, many firms, including Abu Dhabi's Al Masaood Group, are revamping and streamlining their operations.

Constantin Salameh, the chief executive of Abdulla Al Masaood and Sons, said: "I think all groups are doing it, but these adjustments are healthy."

For his part, Mr al Habtoor said that his company emerged from the crisis with no debt and that it gave many of its more than 40,000 employees raises and bonuses last year. He said that future projects would be funded out of the company's cash flow and that he was disinclined to use the leverage of bonds and bank loans.

At the same time, he argued that too much has been made of the debt restructurings under way at other companies.

"Everybody in the world, they restructure payments. Even the US has debts," he said. "I can't understand why they are making a big deal of it. That is common in banking, which is a partnership between you and the banker."

Mr al Habtoor, who founded the company in 1970, sold 45 per cent of his contracting business in 2007 to the Australian firm Leighton Holdings for $845 million. Analysts believe Leighton will have to write down the value of its investment by as much as $300m because of the continuing difficulty in collecting money owed by clients.

Mr al Habtoor said he longed for the days when contractors received cheques within days of requesting payment and that the problem of companies not honouring their commitments "must be tackled" at the governmental level.

He also said he believed government officials should consult more closely with business leaders as they craft the laws and policies that will have a direct impact on the economy.

"We will help them. We will not charge and we will give them an honest opinion because this is our country," he said. "We love this country and we are family with them."