By Hadeel Al Sayegh and Davide Barbuscia
DUBAI, Oct 7 (Reuters) – Just over six years ago, Dubai-listed Arabtec Holding ARTC.DU had investors eating out of its hands.
At a lavish shareholder meeting at Abu Dhabi’s St. Regis Hotel, the contractor that helped build the world’s tallest skyscraper, Dubai’s Burj Khalifa, outlined plans for listings in London, Hong Kong and New York.
Those plans never materialised. After capital injections between 2013 and 2017, management changes, layoffs and rounds of restructurings, Arabtec’s shareholders, which include Abu Dhabi state fund Mubadala, decided last week that the Gulf’s largest listed contractor should file for insolvency.
Arabtec had around $2.75 billion in total liabilities at the end of June, including almost $500 million in bank borrowing.
The liquidation, likely to lead to further layoffs in a company which had a 40,000 strong workforce at the end of last year, marks the end of an era of plentiful construction for local contractors.
“A great company that is 45 years old disappeared off the face of the earth. I find it extremely sad that an iconic company like that disappeared,” Ziad Makhzoumi, chief financial officer of Arabtec from September 2008 to March 2013, told Reuters.
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.
Industry sources, analysts, and bankers point to an unsustainable business model used by some contracting firms in the region.
They undercut competitors on pricing and sometimes cost a project at a discount to win a tender in the hopes of making a profit through additional work when it starts running.
It’s a model that works on the premise that supply