Drake & Scull moves closer to restructuring its debt as it swings to Q1 profit

Company needs approval for its plans from two-thirds of creditors by value

Drake & Scull International on Sunday reported a jump in its first-quarter profit on the back of higher other income and revenue. Rich-Joseph Facun / The National

Dubai-based contractor Drake & Scull International (DSI) said it is circulating its debt restructuring proposals among its 600-plus creditors for approval as it reported a jump in its first-quarter profit.

The company reached an agreement with a group of its biggest lenders on its restructuring plan earlier this year. It is currently in the process of finalising the deal through the circulation of legal documents among the creditors, Drake & Scull said in a statement to the Dubai Financial Market on Sunday.

“Once the creditors receive the documents they will be asked to submit their vote to approve the restructuring plan,” Shafiq Abdelhamid, chairman of DSI, said.

“When approved by two-thirds (by value) of the creditors, with the support of the FRC (Financial Restructuring Committee), DSI will then approach the courts to obtain their approval which will bind all creditors and allow the rights issue process to be initiated.”

The financial restructuring would be the second the company has undergone in the last four years. In 2017, a capital restructuring took place that saw Dh1.7 billion worth of shares cancelled to expunge historic losses and Dh500 million invested by private equity firm Tabarak Investment for a strategic stake in the company.

The company reported its accumulated losses had fallen to Dh4.79bn as of March 31 from Dh4.9bn at the end of last year as it reported a net profit during the first quarter of Dh115.3m, compared to a loss of Dh29m in the same period last year. Revenue rose 16.5 per cent to Dh45.8m and the company wrote back Dh166m of liabilities which it says it no longer needs to repay.

"The group assessed during the period that certain trade payables and accrual, amounts due to customers on contract, advance from customers recorded in earlier periods were no longer payable and has, accordingly, written back such amounts under other income," it said.

Total assets at the end of the quarter slid 6 per cent to Dh546.2m compared to the end of December last year. Total liabilities also fell 3 per cent to Dh4.34bn during the period, according to the company.

The company secured contracts worth Dh376m to build several projects in India, Tunisia and Palestine, it said in April.