Receivables cloud still hangs over Dubai's Arabtec

Dubai-based Arabtec Holding has yet to receive 60 percent of the money it is owed for projects completed before the onset of the global financial crisis, its CFO said Tuesday. The emirate's largest builder by market value is owed a “substantial amount” by local developers, but expects all outstanding bills to be paid by the end-2012, said Ziad Makhzoumi.“There are two sets of payments, payments due from work we have completed now and payments due from work we completed before,” he said on the sidelines of the CEO Middle East Awards in Dubai. “Close to 40 percent [of pre-recession bills] has been paid, and continues to be paid. So we hope that within a year or so, most of the outstanding payments will be up to date.”Arabtec was among dozens of contractors that bore the brunt of Dubai’s property collapse in late-2008.  More than half of developments in the city were scrapped or put on hold in the wake of the financial crisis, leaving construction firms scrabbling for cash as project finance dried up. Billions of dollars of bills went unpaid by companies including state-backed developer Nakheel, which said Aug 24 it was still restructuring AED19bn ($5.17bn) of debt owed to trade creditors.Arabtec, one of the developer’s largest trade creditors, said in May it was owed AED2.5bn in late payments from developments. Nakheel was among the largest defaulters.   The developer of Dubai’s palm-shaped islands said Aug 24 it would issue the first tranche of an AED4.8bn ($1.31bn) Islamic bond to trade creditors in part-payment for outstanding bills. “Nakheel have been prompt and on time, and all the other developers on new projects are also paying on time. [The amount we are owed] is substantially less than it was three years ago,” Makhzoumi said. Arabtec intends to retain the sukuk, in contrast to tens of holders who flooded the market this week in a bid to sell the Islamic bond.“Now is not the right time to consider [selling],” Makhzoumi said. “We don’t need to sell them. They are giving us a 10 percent coupon and no other bond is giving that, and we are borrowing substantially less than that. So financially speaking it makes sense to keep them. “We are hopeful when the market moves we will reconsider. We don’t have a formal price for them yet because there are quoted prices which vary between 80 percent and 90 percent.”Arabtec saw its profits fall by 74 percent in the second quarter as general and administrative expenses soared. The Dubai firm said made a net profit of AED28.9m ($7.9m) for the three months ending June 30, down from AED11.1m in the year-earlier period, as expenses nearly doubled to AED94.1m. The company currently has a backlog of projects worth around AED15bn ($4.08bn) in all of its markets by the end of the year, but it is increasingly looking to expand overseas to diversify away from Dubai's once-booming property sector, which has been blighted by oversupply and a lack of demand, with developers slowing or cancelling projects. Arabtec said in June it would expand its Saudi workforce to 25,000 as it hopes to make the Gulf state its largest market. The company is also bidding for work in Qatar, as the tiny Gulf country prepares infrastructure for the soccer World Cup in 2022.