Leighton's Dubai Shock

Sydney, Dec 2, 2008 (ABN Newswire) - Investors have Leighton Holdings a whack yesterday after it revealed that work on a $600 million-plus project in Dubai had stopped.

The shares fell more than 7%, or almost $1.80 to $22.55 on the news. The plunge deepened in afternoon trading as investors looked through Leighton's assurances.

Leighton tried its best to put a positive spin on the news, but the fact is that it's now involved in an area where the credit crunch has erupted and hurt local property and mortgage groups. Two were rescued last week.

Leighton said the suspension of construction at the $AED2.9 billion ($A1.22 billion) Trump Tower project in Dubai will not have a material financial impact on its 45% owned Al Habtoor Leighton Group.

The project was worth $AED1.45 billion ($A610 million) to the Al Habtoor Leighton Group, which was created last year through the merger of Leighton International's operations in the Arabian Gulf with United Arab Emirates-based Al Habtoor Engineering.

Al Habtoor Leighton Group was constructing the Trump Tower, for Dubai-based property development company Nakheel, in a joint venture with South African construction and engineering group Murray & Roberts.

However, Nakheel announced on Sunday it was scaling back work on some of its projects to accommodate the current easing market conditions.

"Nakheel has agreed to cover all Al Haboor - Murray & Roberts' costs incurred to date," Leighton, told the ASX yesterday.

Leighton pointed out that Al Habtoor Leighton Group recently secured the $AED8.85 billion ($A3.72 billion) Dubai Pearl project and the $AED3 billion ($A1.26 billion) Zayed University project in Abu Dhabi.

"The Al Habtoor Leighton Group is close to finalising another major infrastructure project in Dubai, which should ensure that work in hand remains at record levels," Leighton said in its statement.

Well, yes, but Nakheel is controlled by the Royal family and is under pressure. It didn't participate in the recapitalisation of the struggling Mirvac property group last month, even though it had built up a 14.9% stake.

Nakheel, on Sunday said it has made 500 people (around 15% of its global workforce) redundant in scaling back projects, as the market slump bites into Dubai's fast-growing real estate market.

"Dubai's master developer, Nakheel, announced on Sunday 30 November 2008 that it was scaling back work on some of its projects and that it has adjusted it staffing requirements accordingly to accommodate the current easing market conditions," a Nakheel statement said.

This is the second biggest confirmed job cut in the UAE so far, and comes after two developers, Damac and Omniyat confirmed a total of 269 - 200 by Damac and 69 by Omniyat.

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