Builder was already under pressure due to existing debt pile
Saudi government took a stake of 37% stake in the firm
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Saudi Binladin Group failed to pay thousands of employees as the construction giant reels under the impact of coronavirus and restructures about $15 billion of debt.
The conglomerate missed some salary payments in April and May, according to people with knowledge of the matter. It’s not clear yet whether the company, which employs about 100,000 staff, will be able to pay those employees in June, the people said, asking not to be identified due to the sensitivity of the matter.
Existing problems at the construction firm -- for decades Saudi Arabia’s go-to developer for mega-projects such as airports and holy sites in Mecca and Medina -- have been compounded by the impact of the coronavirus, which has halted developments and forced the company to burn through cash without any new project mandates, the people said.
Most of the affected employees are based at Binladin’s headquarters in Jeddah and work in its construction unit, the people said. Representatives for Binladin didn’t respond to several calls, messages or emails seeking comment.
Binladin, which is working with Houlihan Lokey Inc. to tackle its debt pile, put thousands of employees on indefinite, unpaid leave as it sought to lower costs by as much as 50%, people with knowledge of the matter said in May. It also reduced pay by about a third during the holy month of Ramadan to reflect shorter working hours, which impacted about half of its 100,000 employees.
Some unpaid staff have anonymously taken to Twitter to voice their anger over the delays, using the hash tag that translates as Delays in Binladin Salaries. Bloomberg News wasn’t able to independently verify their identities.
Even before this year’s crisis, Binladin was still suffering from the oil-price slump in 2015, which forced the company to cut more than 50,000 jobs in 2016. The layoffs prompted a rare show of labor unrest in the kingdom and forced the government to put up the funds to pay salaries.
Saudi Arabia’s economy is being battered by a slump in crude prices this year and from lockdown measures to prevent the spread of Covid-19. Faced with the prospect of ballooning deficits, the government has tripled valued-added tax, cut allowances for state employees and tapped its foreign reserves.
The government took a stake of about 37% stake in the firm from the Binladin family to “settle outstanding dues” after Bakr Binladin, the half-brother of al-Qaeda founder Osama Bin Laden, was swept up in a so-called corruption crackdown in November 2017.
— With assistance by Matthew Martin, and Farah Elbahrawy