Saudi Arabia contractor Al-Khodari presents restructuring plan
Cash-strapped contractor discusses ongoing developments following losses worth 198% of its capital as of Feb 2019
Saudi Arabian construction company Abdullah Abdulmohsen Al-Khodari Sons Co announced in a statement to Saudi stock exchange Tadawul that it had recently concluded a shareholders meeting to announce its restructuring plan, with the cash-strapped construction contractor seeking to recover from losses – worth 198.52% of its capital as of February 2019 – and return to financial profitability.
In an Arabic-language statement to Tadawul, Al-Khodari said the meeting was attended by vice chairman Jamil Abdullah Al-Khodari; chief executive officer and board member, Fawaz Abdullah Al-Khodari; and representatives from the contractor’s financial and legal teams.
Presentations made to shareholders on the day included details of developments at Al-Khodari following accumulated losses worth more than half its capital, and an overview of the terms and processes related to the Saudi Arabian bankruptcy system.
Al-Khodari terminated its contract with the kingdom’s Ministry of Transport in March 2019, citing lack of adequate resources to deliver the project.
The cash-strapped company asked the government to terminate its $24.6m (SAR92.4m) infrastructure agreement for a two-lane road through Al Wadiah, Najran, and Sharorah in the south of the kingdom, adding that it was concerned by the cost of resources the project would require, and confirmed that the transport ministry's cancellation would lead to a financial impairment cost of $9m (SAR33.8m).
Al-Khodari withdrew from a hospital project in Qatif and another maternity facility in Ar Rass this May.
In its Tadawul missive this February, Al-Khodari said its cash flow challenges started with the work permit fees imposed on local companies.
The rate of Nitaqat (Saudisation) – Saudi Arabia’s employment nationalisation system – required within large contracting companies was raised from 5% to 8%, and Saudi staff were not considered as such unless their salaries were $800 (SAR3,000) or higher.
In the event of non-compliance, no visas would be issued to the company for labour staff. Al-Khodari, in its Arabic-language missive to Tadawul, said that it experienced a cash flow crisis in 2014, which forced it to default on its compliance with Nitaqat. When it was able to comply, it did so at the expense of incurring operational costs. Its financial situation worsened in 2015 due to what Al-Khodari described as unreasonable delays in securing overdue payments from clients.