Saudi construction giant looks to cut costs for Mecca project

      Published on Friday, 15 May , 2020      619 Views     
Saudi construction giant looks to cut costs for Mecca project

  • Saudi News

Binladin International Holding Group, Saudi Arabia’s biggest construction company, is seeking an adviser to cut costs as well as restructure the debt of a Mecca skyscraper complex, sources familiar with the matter told Reuters news agency, and a document showed.




The move is part of efforts to restructure the construction group after the government took a 35 percent stake from Bin Laden family members that were swept up in an anti-corruption campaign launched by Riyadh in late 2017.

Binladin completed the $15bn government-owned Abraj Al Bait golden clocktower complex in 2011. The development has seven towers of hotels and malls and looms over the Grand Mosque in Mecca, the holy city visited by millions of Muslim pilgrims every year.

The 603-metre (1,978 feet) tall clock tower is the landmark feature of the complex, which was built to modernise the old city and provide accommodation and other facilities for pilgrims.

Binladin has been seeking proposals from advisers “on behalf of the shareholders in the Abraj Al Bait Complex” to review its operational and financial performance and to assess financial restructuring options, it said in a request for proposals in the document seen by Reuters.

The adviser would “review potential financing structures and options for implementation which may include rescheduling current loans, refinancing or other options taking into account any implications of changes in ownership structure,” the document said.

Saudi Binladin did not respond to emailed requests from Reuters for comment on the proposal.

The group has recently appointed financial advisory firm Houlihan Lokey to restructure billions of dollars of company debt, two financial sources said. Houlihan Lokey declined to comment.

The Binladin group’s request for proposals is dated October 2019, but the sources said they had learned about it only in recent months.

Double efforts

The Abraj Al Bait complex was built by Binladin under a lease of the Development of King Abdul-Aziz Endowment Project and with a “design, build, operate, and transfer” agreement which expires in 2035.

Three of the towers were leased to investors, including a Kuwaiti consortium, while the original shareholders maintained control of the remaining complex including four hotels, the document showed.

“Essentially this is restructuring of government debt,” said one of the sources, speaking on condition of anonymity as the matter is private.

A Saudi Arabia Ministry of Finance spokesman said: “We are aware and support the SBG [Saudi Binladin Group] board’s efforts to bring more efficiency into their operations and restructure their balance sheet to enable them to utilise the strength and execution excellence to bounce back and excel as a significant contractor and developer in the region and beyond.

“As a shareholder and the largest client, we support the group efforts and encourage them to double their efforts.”

Binladin has dominated the Saudi construction sector for years and is central to the country’s plans for tourism and infrastructure projects aimed at diversifying the economy away from oil revenues by 2030.

Those plans risk being compromised by an economic downturn caused by the coronavirus pandemic and low oil prices that are forcing the government to rein in spending and increase borrowing.

The annual Hajj pilgrimage, scheduled for late July this year, is an important source of tourism income for Saudi Arabia, but it could be postponed due to virus containment measures. Some 2.5 million pilgrims usually flock to the holiest sites of Islam in Mecca and Medina each year for the week-long ritual.

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Category Saudi News | 2020/05/15 latest update at 3:00 PM
Source : Al Jazeera | Photocredit : Google
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