Alvarez and Marsal, the turnaround specialist overseeing the bankruptcy of Lehman Brothers, is negotiating with several Dubai-owned entities about mandates for organisational restructuring. The firm is also in advanced talks with one major government-related investment company, said Antonio M Alvarez, the firm's managing director. "We have had various discussions in the past six months and government-related entities are among them."
Many Dubai Government-owned companies with large debt are merging operations in response to the global economic slowdown. Dubai Holding and Dubai World have started to consolidate back office operations to save costs. The Dubai Government has also embarked on a US$20 billion (Dh73.45bn) bond programme to help some of its companies fund their operations. "We work alongside investment bankers with capital markets capabilities and focus on what the company can generate in terms of cash flow including evaluating their business plan, said Mr Alvarez.
"There are a lot of unfeasible business plans in this region at the current levels of leverage." The Gulf's biggest continuing debt restructuring is taking place at the two Saudi conglomerates, Saad Group and Ahmad Hamad Al Gosaibi and Brothers. They started defaulting on payments in May and have since been sued by a number of banks in New York and London. They are also suing each other. The pair owe an estimated total of $20bn to their creditors.
The Investment Dar, the Kuwaiti firm that owns half of Aston Martin, said this week it had reached a standstill agreement with creditors as part of a debt restructuring following the firm's default on a $100 million Islamic bond in May. Alvarez and Marsal already has won three small mandates in the region. It is supporting one company on "cash issues" while broadly reviewing its business plan, helping another to "deleverage" and is consulting with a multinational looking to expand its regional subsidiary.
Until recently the firm focused on helping multinationals improve their operating performance, but is now concentrating on organisational restructuring. "About 12 months ago the environment changed completely," Mr Alvarez said. "Initially, the sick companies got financial backing from stakeholders, but on the horizon we are not sure where the money will come from, which will force companies to downsize and rationalise," he said.
According to Mr Alvarez, numerous businesses in the region have been based on "flawed business models" where demand was expected to be much higher. He expects firms in the construction, hospitality, healthcare and financial sectors to require the most help. skhan@thenational.ae uharnischfeger@thenational.ae
