CIMIC offered to sell Qatari JV stake to Hawar Group for 36c

Construction giant CIMIC offered to sell its Qatari joint venture stake for 1 Qatari riyal (36c) as it sought a quick exit from the Middle East.

CIMIC is a major construction firm in Australia, including leading Melbourne’s West Gate Tunnel project. Picture: Jake Nowakowski

Construction giant CIMIC offered to sell its Qatari joint venture stake to local partner Hawar Group for 1 Qatari riyal (36c) as it sought a quick exit from the Middle East but the deal was rejected due to mounting concerns over the level of unpaid debts, clouding the Australian company’s attempts to leave the region.

CIMIC, Australia’s biggest construction company, has been working to offload its 45 per cent stake in the Dubai-based BIC Contracting joint venture after a disastrous foray into the Middle East where it suffered losses and a $1.8bn writedown.

Qatar’s Hawar was approached by US investment bank Moelis, tapped to advise CIMIC on the BICC sale, with an offer to pay a token amount for its 49 per cent stake in the duo’s joint venture known as Leighton Contracting Qatar. Hawar already owns 51 per cent of the venture.

However, the buyout proposal was rejected by Hawar as it weighed legal action against the CIMIC unit after a breakdown in the relationship between the pair. It was also worried unpaid debts topping $US1bn ($1.3bn) made any deal untenable, sources told The Australian.

The prospects of CIMIC finding an alternative buyer for its once lucrative Qatar stake now appear remote. An official administrator appointed to probe the Cimic unit’s finances said any deal as currently unworkable.

“A further complication in the resolution of Leighton Contracting Qatar’s position is the existence of an offer from Gulf Leighton and its Australian parent for the sale of its shareholding to Hawar Group for a token sum in exchange for assuming its liabilities,” a statement by Qatar’s Judicial Administrator said.

“As these have not yet been quantified, no buyer is in a position to accept the terms of sale.”

The administrator also voiced its frustration over a lack of contact with CIMIC’s Middle East executives as it works desperately to source enough funds to pay workers and keep ongoing infrastructure projects afloat.

“Presently, our only contact with Leighton Contracting Qatar management is through its senior legal counsel, who is based in Dubai. We have had no direct communication with CIMIC since our appointment as administrator. We understand that this is also the case with the local shareholder,” the statement by the Judicial Administrator said.

“We are unable therefore to affirm whether the offer to acquire Leighton Contracting Qatar from Gulf Leighton for a nominal sum is still open. In any case, without a clear and credible confirmation of the balance sheet of Leighton Contracting Qatar, even a nominal purchase price may lead to undeclared obligations far above the valuation. The local partner has advised us that they cannot accept the risk.”

CIMIC, which declined to comment on the offer to Hawar, has seen its Middle East offshoot slapped with more than 350 legal claims in gas-rich Qatar amid concerns hundreds of workers have been unpaid for months, leaving some of them unable to leave the country.

The Sydney-based contractor responded to The Australian’s revelations by stating it was prioritising the “safety and security” of workers at its Middle East unit after The Australian revealed unpaid debts at its Qatar venture had sparked fears of a humanitarian crisis.

“In its capacity as an investor in BICC, CIMIC is continuing to promote the safety and security of BICC’s people as a priority,” the company told the ASX.

Despite towering debts, CIMIC downplayed its exposure on Monday and referred to a $700m cash pledge made a year ago to cover debts the Gulf venture owes to its lenders.

“CIMIC disclosed the financial impact of its exposure to BICC, consisting of a one-off post-tax impact to its 2019 financial statements. This represents CIMIC’s exposure in relation to BICC,” CIMIC said on Monday.

Dozens of suppliers and subcontractors also filed legal claims in Qatar, with many operators unable to pay workers or finish projects until they recovered outstanding debts, sources said.

Several hundred, mostly foreign, workers owed salaries and end-of-benefit services became stranded in labour camps, unable to afford flights to their home countries with few able to find alternative work as the COVID-19 slowdown sapped momentum in construction projects.

CIMIC, set to report its annual results on Wednesday, first gained exposure to the Middle East in 2007 but conditions started to unravel in recent years leading to its decision a year ago to quit the region.