Arabtec rights issue gets green light after stormy general meeting

The chief executive of Arabtec Holding put in a robust defence of the construction company’s decision to embark on a recapitalisation when quizzed by shareholders at a stormy annual general meeting on Tuesday, where a Dh1.5 billion rights issue aimed at boosting its balance sheet was approved.

Hamish Tyrwhitt also said the company was expected to post a profit in the first quarter of this year, having endured nine successive quarterly losses, and is in discussions with the banks to sort out its loan covenants.

During a meeting lasting over two hours, shareholders queried whether the capital restructuring for which the company was seeking approval was necessary.

“The reason why we have gone through a capital raising, in our view, is that the company cannot burden more debt,” said Mr Tyrwhitt. “One of the many options we looked at was taking on more debt, which was ruled out.”

Mr Tyrwhitt said the board and its management team “went through an exhaustive list of options” before embarking on the recapitalisation, through which the company is making a cash call from investors via the rights issue, and then cancelling shares (on a pro-rata basis) worth over Dh4.6bn to extinguish accumulated losses.

“What we’re doing here is in the best interest of all shareholders and is in the best interest of the company going forward,” Mr Tyrwhitt said. “The Dh1.5bn that we are raising in our view is what we require so that the company can return to a normalised state and start functioning as a construction company should.

“We’ve also had discussions with the banks to sort out our loan covenants, our whole debt maturity profile going forwards. All of these things are happening in parallel.”

The Dh1.5bn rights issue portion of the restructuring has been priced at par value, or Dh1 per share, which was the minimum amount that the company could set the issue at. Shares closed on Tuesday up 0.36 per cent at 84 fils each, meaning that shareholders will have to pay a premium to avoid their holdings being diluted.

The rights issue has effectively been underwritten by the company’s biggest shareholder, Abu Dhabi’s Aabar Investments, which holds a 36.11 per cent stake in the business and has agreed to buy up any unallocated shares.

Shareholders also queried the fact that a Dh1.18bn amount owed to it from related parties was written off as part of Dh1.9bn worth of write-downs made last year.

Mr Tyrwhitt, who was appointed in November, declined to go into details of who the related party was, or why the money was written off.

“It’s not in shareholders’ interests to go into the detailed negotiations we may have on receivables,” he said. “Because if I give you a number or a position, we’re also giving it potentially to the person that owes us the money. If I say I’ve got a provision or I’ve written off something, then the other side will be aware of that.”

He said that the company would “do everything possible and appropriate” to recover money it is owed. He said that in general, receivables are only written off if the management team feels that it does not have the ability or the right to collect this money, but added that Arabtec would “continue to pursue all money that we believe is owed – whether it has been written off or not”.

Shareholders eventually approved all of the resolutions at its annual general meeting on Tuesday, including the terms of the capital restructuring.

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