AT its zenith, the construction giant that was J&P Overseas Ltd., had about 15,000 people on staff and boasted a turnover in excess of $1.5bn. Today, the venture lies in ruin, forced into liquidation and hounded by creditors, while the heirs to the fabulously wealthy families are at each other’s throats in the courts and in the public space. Who or what is to blame depends on whom you ask; but an insider insists the company’s demise was not inevitable.
In an interview with the Sunday Mail, Christos Joannou, grandson of co-founder Stelios Joannou and son of Dakis Joannou, said the current predicament is the outcome of a series of bad decisions along the way, gradually burning through the cash.
Joannou said he was emotionally as well as professionally invested in the firm, having become involved as far back as 1998. He is probably the individual most involved in and connected to the company among the descendants of the founders.
“The company was based on the trust between the two partners, and the loyalty of our staff,” he recalls.
“The partnership between my grandfather Stelios and George Paraskevaides was a very complementary one. Stelios Joannou would primarily deal with the finances and Mr Paraskevaides with operations in the Middle East. My father dealt with operations in Libya and in Greece.
“So, there was trust between them and while Mr. Paraskevaides would push for new, riskier, horizons, my grandfather would be more conservative and together they would strike the perfect balance.”
Asked when things began to go south for the contractor, he identified the root cause of the problem to the lack of swift decision-making due to the way the company was structured.
“As a principle for the Joannou family, we look to hire professional management to run our businesses and do not interfere with the day-to-day-management. We exercise our rights through board positions. The other side [meaning the Paraskevaides family] was dogmatically opposed to this.”
For years, the Joannou family had been trying to shift the company away from a 50/50 deadlocked board and move towards a proper governance structure with an independent board and empowered management.
“What worked for the company in the 1970s with two partners running a small company on a 50/50 basis, definitely does not work for a company with a turnover in excess of $1bn.”
The watershed moment was when they came close to taking the company public, back in 2008.
It never happened.
“The move was blocked again by the Paraskevaides family. Hence, we missed the opportunity to lead the company to a new era.”
Pressures began to mount once the market in the Middle East got more competitive.
“J&P did not adapt to the new reality, despite my family’s efforts. We remained in a deadlocked structure from the past without the ability to react swiftly and adapt our company to the new realities.”
The split in philosophies manifested in 2015 when the two families moved for separation. J&P Overseas went through a ‘demerger’ – in layman’s terms, they divvied up their operations, with the Paraskevaides side running projects in Saudi Arabia, Libya, Kurdistan, and the Joannou family taking control of Oman, Qatar, United Arab Emirates and Jordan.
In early July of this year, the Paraskevaides family shareholders, following lengthy litigation, replaced Andreas Papathomas, who represented the Paraskevaides family on the board of J&P Overseas (he was acting on behalf of Mrs Thelma Paraskevaides, wife of the co-founder) with Leonie Paraskevaides, daughter of the co-founder.
“We then decided to cancel the demerger, appoint common management and managed to finally take a proper look at the Saudi business. It became evident that the situation was much worse than what we had all thought in Saudi Arabia, with the possibility of dragging down the whole group.”
The company next proceeded to appoint consultancy firm Alvarez & Marsal to advise them on a restructuring proposal to the banks. The board jointly presented a restructuring proposal to the banks in late September.
“The proposal was structured in such a manner to protect all the company’s staff and potentially secure that the banks would have all their exposure with the company gradually settled. Unfortunately, this was rejected by the banks and they encouraged us to move into administration as they had lost trust in our operating model.”
In mid-October, a court in Guernsey – where the company was registered – appointed Alvarez & Marsal as administrators, but within days of their appointment, the consultants decided that liquidation was the way to go.
“Unfortunately, it was too little too late. It was actually a non-fixable situation, the trust by the banks could not be restored. Alvarez & Marsal were not willing to continue as an administrator and no other firm seemed willing to become an administrator either.”
PROTESTS AND STRIKE
In spring of this year, employees in Saudi Arabia began protesting about not being paid; a strike followed later.
Some of the blame went to Papathomas, who had married into the Paraskevaides family, and who was ultimately in charge of the Saudi projects. It was then that it dawned on the two families that they had to find solutions jointly because they were jointly liable to creditors.
According to Joannou, the management model under Papathomas led to “tragic results, and we ended up with the Saudi staff pleading Mr Papathomas to take care of the unpaid dues, including repayment of the $23m loan due to the company by the Paraskevaides side.
“No action was really taken on his part, except for writing letters to the Saudi staff accusing me as being somehow responsible for the fact that they were unpaid!”
Meantime, the 200 Cypriot employees in Saudi Arabia are claiming that they are stranded in the Arab country, either unable to pay for their residence permits or the airfare to leave.
“What is happening right now is undoubtedly unfair both to the employees and their families. If all the shareholders contributed to the company like our family did, injecting more than $40m in cash, the situation of overdue payments could be addressed in a much better manner.”
However, in the same breath Joannou said criticism of his family was unfair, given that the Saudi operations were not under them, but rather under the Paraskevaides side.
“I am saddened by the fact that employees of J&P Saudi Arabia have chosen to accuse our family of purposely driving the company into the ground, even saying that we have used their unpaid salaries for the past few months to contribute to the Stelios Ioannou Learning Centre at the University of Cyprus.
“I understand that J&P Overseas staff are going through a difficult ordeal, however linking their unpaid salaries to a donation my grandmother made ten years ago for the students of Cyprus is unfair and uncalled for.”
As this report was being written, more details were emerging about the dire state of the company when Leonie Paraskevaides released a statement with her version of events.
She was appointed to the board of J&P Overseas in early July 2018, following the ouster of Papathomas.
Paraskevaides said she came to realise that the decision for a demerger was “disastrous” and needed to be reversed.
According to her, initially she was informed that, following an external audit, the company’s losses for 2017 were in the region of only $7m.
“A few days later…I learned from the same officials who for years were active members of J&P Overseas Ltd, that is, Christos Joannou, the CEO Greg Christofides and the recently appointed CFO Tasos Ziziros, that the real losses for 2017 were approximately $750m and not $7m,” she said in her statement.
No one adequately explained to her this gross discrepancy, Paraskevaides said. “Essentially, the company had become insolvent, with liabilities exceeding assets by about $500m.”
This is where it gets messy, as she returns the favour by taking a dig at the Joannou family.
“Later,” she writes, “Christos Joannou recommended the appointment of external consultants, among whom Alvarez and Marsal, with whom he had already developed a close association regarding his own personal financial matters.
“I admit I had serious reservations about their [Alvarez and Marsal’s] impartiality, but I agreed to their appointment because the most important thing was to bring unity to the company at this critical stage.”
Addressing the staff of the company, Paraskevaides prods them to disregard the disinformation swirling about:
“Do not be deceived by talk that the massive amounts which leaked out of your company ended up in parts unknown. No one and nothing evaporates into thin air. The records are there.”
Addressing Paraskevaides’ assertions, Joannou told the Sunday Mail:
“She claims that she was shocked by the $750m loss. The majority of this was because of the Saudi Arabia business and we only found out the actual picture at the same time in July when this was presented to us by management.
“She asked for an explanation of the difference between the $7m and the $750 and this was fully explained to her by the deputy CFO in early October. She always fails to mention that the Saudi Arabia business was managed by the Paraskevaides family through its chosen representative at the time, Papathomas.”
Joannou also objected to Paraskevaides’ insinuation – as he sees it – that the losses of the company were ‘stolen’ rather than being operational losses.
“This is a very heavy and unfounded, yet intentionally malicious, accusation and we will consider legal action for defamation. Again she is slinging mud at everybody…pretending to be a victim like the staff, while ignoring the Paraskeavides family’s failings, especially in Saudi Arabia.”
According to Joannou, no ‘mystery’ surrounds the $750m hole. This has been fully explained to Leonie Paraskevaides by the company’s management, yet she chose to ignore the detailed explanations.
“The Paraskevaides-managed Saudi operations accounted for 60 per cent of that amount. Another 30 per cent consisted of the writing-off of assets and doubtful receivables on the balance sheet to have a more conservative treatment, as proposed by the management.
“About 10 per cent of those losses did indeed show up on the Joannou-managed side. They concerned the Orbital Highway project in Doha, Qatar, where we had to renegotiate the final contract sum downwards with the client due to disagreements.”
It’s a safe bet the recriminations between the two once-allied families will fly for months, if not years to come. Meanwhile, the financial vultures circle menacingly around the company’s dead corpse, and thousands of people must now look for new jobs.