May 8, 2019 / 9:22 AM / 2 months ago

Turnaround firm Alvarez & Marsal to boost Gulf presence amid downturn

DUBAI, May 8 (Reuters) - Turnaround firm Alvarez & Marsal, which ran Lehman Brothers after the bank’s collapse in 2008, plans to almost double its staff in the Gulf by 2020 to take advantage of a slowdown in growth and increasing distress in the real estate sector.

Dubai property prices have fallen since a mid-2014 peak, hurt by weaker oil prices and muted sales, although the slide has not come close to the more than 50 percent drop in 2009-2010, which pushed the emirate close to a debt default.

Two of the largest construction companies in the Middle East, Drake & Scull International (DSI) and Arabtec Holding have engaged restructuring advisers, while yields on bonds issued by real estate developers like Dubai’s DAMAC Properties have risen significantly, reflecting investor concern over upcoming debt and land repayments.

Alvarez & Marsal’s managing director in Dubai, Neil Hayward, said the Gulf region is nearing the end of a downward economic cycle, where debt restructurings offer only temporary solutions to problems that require a rethink of the whole company’s operations.

“In such a market we advise clients to reduce costs, sell non-core assets, use cash to deleverage, and then have the flexibility to invest into the upturn and accelerate away from the competition.”

The New York-headquartered turnaround specialist has 56 employees in Dubai and four in Saudi Arabia and is looking to increase the size of its Gulf operations to 100 employees by 2020, Hayward said, adding that real estate was the largest sector affected by the downturn apart from the energy sector.

S&P Global Ratings expects Dubai residential property prices to fall another 5-10 percent this year due to a continued gap between supply and demand, before steadying in 2020. (Reporting by Davide Barbuscia; Editing by Kirsten Donovan)

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