Drake & Scull writes off $1.1bn in debts and completes restructuring requirements

Contractor says it will now be able to resume activities by entering into tenders and obtaining new projects

Drake & Scull said the debt write-off will be reflected in the company's financial statements in the second quarter of this year. Rich-Joseph Facun / The National
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Dubai-based contractor Drake & Scull International has written off Dh4.18 billion ($1.1 billion) in financial and commercial debts and started the process of settling with other creditors after completing the requirements of its restructuring process.

The company, which resumed trading on the Dubai Financial Market last month after more than five years, will now be able to resume its activities by entering into tenders and obtaining new projects, it said in a bourse statement on Monday.

As part of the process, Drake & Scull will issue sukuk to the company’s creditors who have debts equal to or exceeding Dh1 million, with the bonds convertible to shares five years from the date of issuance.

It has also started offering cash settlements for creditors with debts of less than Dh1 million, with a total amount of Dh13.6 million to be paid, according to the final list of creditors published on January 30.

The debt write-off will be reflected in the company's financial statements in the second quarter of this year.

“This is a major achievement which opens new opportunities for the company to expand its operations within and outside the country by entering new bids, thus enhancing profitability, assets, and shareholders’ equity,” it said.

The court’s approval of the restructuring plan and its introduction “has halted all judgments and lawsuits filed by financial and commercial creditors against the company, which are subject to the restructuring process”, it added.

The company's shares were trading up 7.84 per cent at Dh0.385 per share at 12.39pm on Monday.

Drake & Scull's return to the DFM follows long-drawn debt negotiations with its lender and trade creditors, as well as a series of court cases, a complete managerial revamp and two complex capital restructurings over the past decade.

The contractor fell on hard times during the three-year oil price slump in 2014, which heavily affected the property and construction sector in the region.

Trading of its shares was suspended in November 2018 after the company reported heavy financial losses.

In 2022, Drake & Scull completed its restructuring plan after reaching the required voting percentage from its 600-plus creditors for a consensual agreement.

Its net loss last year stood at Dh352.1 million, compared with Dh224.3 million in the same period in the previous year, according to its recent financial statement.

Last month, the company said accumulated losses stood at Dh5.5 billion as of March 31. It expects the benefits of restructuring to materialise in the second quarter of this year, leading to an overall equity improvement of about Dh4.6 billion.

Drake & Scull, which raised more than Dh450 million in new capital this year, said it is also pursuing numerous claims in the market that it seeks to collect from direct settlements or litigation through courts.

Recently, Drake & Scull Engineering, one of its subsidiaries, won a court judgment issued by the Court of Appeal, which ordered a company in Dubai to pay an amount of Dh36.7 million as well as fees, interest and expenses.

“The company has begun taking the necessary measures to execute the award, noting that this amount includes bank guarantees,” Drake & Scull said.

Updated: June 10, 2024, 2:57 PM