Arabtec updates its plan to recovery

Arabtec yesterday published an update to the three-step recapitalisation plan that it hopes shareholders will pass as part of a latest round of fund raising aimed at wiping out accumulated losses.

In a note to the Dubai Financial Market (DFM), Arabtec reiterated that its total liabilities currently exceed the company’s total assets by Dh250.7 million.

Under the DFM’s rules, this means that shareholders are required to take part in a continuation vote. Arabtec shareholders will meet on Tuesday to approve the company’s restructuring programme, which will involve a Dh1.5 billion rights issue followed by a capital reduction.

The rights issue will raise Dh1.5bn through the issue of 1.5 billion new shares, taking the total amount of shares in circulation beyond 6.1 billion. Following this, a capital reduction will take place, where more than 4.6 billion shares will be cancelled on a pro-rata basis, releasing liabilities that will allow the company to write off more than Dh4.6bn of accumulated losses.

Aabar Investments, which is Arabtec’s single biggest shareholder with a 36.11 per cent stake in the company, is effectively underwriting the offer. On March 22, Arabtec filed audited accounts that showed that it declared a net loss to shareholders of Dh3.4bn last year, and that it made impairments of Dh1.9bn.

Last month, Arabtec published its strategy to revive the fortunes of the beleaguered company. After stabilising the company through its planned recapitalisation programme, board members say that next year the company plans to prepare the business for the future, which means keeping costs in check, delivering projects on time and to budget and “consistently” securing a backlog of projects worth about Dh8bn to Dh9bn.

The final phase, which is to begin in 2019, will focus on growth, most notably profit margins and cash generation. This would also be the first year in which it is targeting a potential dividend payment to shareholders.

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