Dubai contractor Habtoor Leighton Group (HLG) owes more than US$1.1bn to its Australian minority shareholder, Leighton Group, according to financial records lodged with the Australian Stock Exchange.
The massive debt includes A$807m (US$835m) in loans, letters of credit, interest and receivables, and A$298m in carrying value.
Leighton Group owns 45 percent of Habtoor Leighton Group (HLG), with the remaining shares held equally by Khalaf Al Habtoor, chairman of Al Habtoor Group, and Riad Sadik, HLG chairman.
HLG was a co-contractor for the Burj Al Arab and is involved in the construction of the much delayed Dubai Pearl, a 20m sqft project expected to be the largest single building in the world, catering for 20,000 people.
The US$2.4bn project is due to be completed in 2016 but is facing delays.
HLG also has been awarded a US$515m contract to construct the US$1.3bn Habtoor Palace hotel in Dubai, slated to be one of the largest hotels in the Middle East.
The company, founded in 2007, was hit badly during the global financial crisis, when several developments stalled.
The company recorded operating losses of more than US$190m last year, according to Leighton Group’s 2012 financial statement lodged with the ASX on Wednesday.
Leighton Group said the carrying value of its investment in HLG decreased A$82m to A$298m due to operating losses and a foreign exchange loss of A$15m and a A$20m impairment.
The impairment is related to a downward revision of HLG’s operating cash flow forecast, reflecting the company’s poor performance and weak market conditions.
Leighton Group said reducing its exposure to HLG was a priority for 2013 and it was working towards previously announced plans to launch an initial public offering in 2016.
It would continue to pursue outstanding debts owed to HLG and diversify the company’s interests.
“Development of the ‘new HLG’ is being progressed under the new CEO and managing director, Jose Lopez-Monis, through diversifying the client and geographic case and focusing on government infrastructure projects, while leveraging the skills of the rest of the group through joint ventures and operational relationships, and through reducing overhead costs to a more sustainable level,” Leighton Group management said in its 2012 financial report
“While the near-term continues to be a challenge for the Group, HLG represents a platform in the Middle East with medium to long-term opportunities.”
Despite the hefty exposure to HLG, Leighton Group reported a A$448m profit, compared to a A$286m loss in 2011.