Perspectives from ISB

The Al Jaber Group is a family owned business based in Abu Dhabi, with interests spanning construction, engineering and shipping. It was established in 1970 by Obaid Khaleefa Al Jaber Al Marri, and today employs over 55,000 employees. The group borrowed extensively at the end of the last decade to expand operations, only to be caught in a debt trap following a local economic slowdown. The company signed a debt-restructuring agreement with banks in June 2014 after being in negotiations for about four years. Al Jaber is among several businesses in the UAE that sought to restructure liabilities after the global financial crisis in 2008 led to a crash in property prices. However earlier in March this year the group missed a repayment on its $4.5 billion restructuring plan.

Now under a new debt repayment plan it offered to creditors, the group has almost doubled the amount of cash it intends to raise from asset sales. It now plans to raise 5.2 billion dirhams ($1.4 billion) by selling assets including real estate and shares by March 2018, compared with the 2.75 billion dirhams proposed earlier. This means, Al Jaber will now need to get an additional 3.9 billion dirhams after already raising 1.3 billion dirhams from previous sales.

The collapse of this group would send shockwaves through the local economy as banks would be forced to set aside significant cash for soured loans; suppliers and subcontractors would go unpaid; and projects which Al Jaber and its companies are working on would stall until new contractors are appointed. To make matter worse, Abu Dhabi’s economic growth will slow to 1.5% this year, from 4.3% in 2015, according to IMF estimates, due to dip in global oil prices.

Source: Bloomberg

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