Mouchel bears harsh testament to heady optimism of the past

The British buildings engineering firm Mouchel overextended itself in the Middle East and has paid the penalty as it suffers from the regional slowdown and delays in payments

The Mouchel signboards visible on some stalled construction projects around the Emirates offer one clue as to why administrators were summoned by this century-old British engineering institution at the weekend.

Payment problems encountered first in Dubai and subsequently in Abu Dhabi were among the reasons the company found itself seeking protection from creditors after shareholders rejected an earlier rescue plan.

The UAE's battered construction sector may be showing signs of a revival but late payments persist four years on from the financial crisis and property industry slowdown.

Many overseas consultants that saw opportunity in the fast-expanding skylines of Dubai and Abu Dhabi are now paying the price for overextending their business plans.

"It is a lesson for all of us in the industry," said Predeep Menon, the Dubai-based chief executive of RSP Architects Planners & Engineers. "All are suffering trying to manage cash flows. While it is not unique to this part of the world, the problem does seem more acute in this region."

Following the appointment of KPMG as the administrator at the weekend, Mouchel sold its assets to a new vehicle, called MRBL, owned by its lenders and management.

The banks, which include Lloyds, Royal Bank of Scotland and Barclays, will erase some £83 million (Dh481.9m) in debt for an 80 per cent stake in the delisted company. The company's management will own the rest.

The deal allows Mouchel to continue its business "in the ordinary course to improve the group's balance-sheet position by reducing debt levels", said David Shearer, the chairman of MRBL.

The problems encountered by Mouchel in getting paid for contracts in the Emirates were among a catalogue of setbacks faced by the company over the past year.

But they were important enough to be noted in its earnings filings as it struggled to reassure investors it could pay its debts this year in the face of a stock slide that wiped more than 99 per cent of its value since 2007.

Grant Rumbles, the chief executive, assured shareholders Mouchel was beginning to see stabilisation in its key markets on March 29 when it disclosed interim earnings.

But in the notes to those accounts it revealed it was waiting for most of the cash owed on a Dh86.4 million (US$23.5m) contract spread across four UAE municipalities. While the statement said the company expected the debt to be repaid in full, it cautioned "there can be no certainty in this respect".

The company had also encountered payment problems in Dubai, where it worked on developments that included Dubai Festival City and Dubai Waterfront . Its signs can still be seen there four years after construction ground to a halt on what was trumpeted as the largest project of its kind in the world.

Mouchel closed its Dubai office after work dried up in 2009 and switched tack to Abu Dhabi, which was seen as a market that offered stronger construction prospects.

Other engineering and design consultancies struck on the same strategy but many were caught out by the halt of public-sector projects in the capital ahead of a spending review that concluded in January.

Joe Burns, the regional chief executive of Mouchel, yesterday confirmed money owed from its municipalities contract was still outstanding. But he said the company had received some very positive signals from its client.

"It's still due but on its way to being settled," he said. "We are very much here to stay and it is business as usual."

The Abu Dhabi Government this year said it was taking appropriate steps to speed payments to engineering and architectural practices.