DSI moves closer to Saudi project debt refinancing
Contractor in advanced talks with KSA creditors and aims to complete project debt refinancing this quarter
LONDON: Drake & Scull International (DSI) aims to complete the 1 billion dirhams ($272 million) refinancing of its Saudi project debt within three months.
The Dubai-based contractor said on Monday that it had completed the restructuring of its corporate general bank debt in the UAE and has secured new credit lines and working capital facilities for its projects. Now the focus will turn to Saudi Arabia.
The contractor hit payment problems after a period of rampant acquisition-driven expansion, especially in Saudi Arabia where the construction sector suffered from the 2014 collapse of the oil price.
Back at home in the UAE, DSI said it had secured the support of all of its creditors after reaching an agreement with nine regional banks to refinance about 566 million dirhams of corporate debt.
That represents more than half of its total corporate general debt which stood at 1.07 billion dirhams at the end of the third quarter last year, the contractor said in a stock exchange filing on Monday.
The tenor and the maturity of the restructured debt have been “extended and re-termed on average for 3 years,” DSI said.
At the same time, the company secured new credit lines with the banks to help deliver ongoing projects in the UAE.
DSI said that the remainder of its general debt, comprising a 440 LONDON: While 2017 was a bumper year for global sukuk issuance, the outlook for Islamic bonds remains “uncertain” for the coming year, according to ratings agency S&P Global.
Global sukuk issuance in 2017 reached $97.9 billion, an increase of 45.3 percent, from the $67.4 billion recorded in 2016. The increase was underpinned by large issuances by GCC countries, particularly the $9 billion sukuk issued by Saudi Arabia in April. This remains the largest issuance globally to date.
“Driving this performance were good liquidity conditions in the GCC and, more generally, globally, as well as activity by some countries with the goal of further developing their Islamic finance industries,” said Dr Mohamed Damak, head of Islamic finance, at the ratings agency.
Non-GCC countries also million dirham sukuk will mature in November 2019.
It aims to begin talks with those sukuk holders in the second half of the fiscal year.
The contractor said it had total bank debt of 2.92 billion dirhams at the end of September 2017 — about two thirds of which is project debt.
“Our main objective is to drive a consensual restructuring plan with all our creditors across the region to rebalance our capital structure to be more efficient and conducive for our business plan and future prospects,” said Rabih Abou Diwan, investor relations contributed to the rise, said S&P Global, with Hong Kong tapping the market again last year and Nigeria issuing its first sukuk. Morocco and Tunisia are expected to issue sukuks this year, according to the report.
The report said while core Islamic finance countries will continue to have “significant” financing needs in 2018, the sukuk market could be held back by tightening global liquidity and rising geopolitical risks in the Middle East.
The report cited sanctions imposed on Qatar by a group of Arab states in June 2017, as well as continued animosity between Iran and GCC countries as factors that may undermine investor interest in the product.
It also suggested that the “slow progress” on standardizing Islamic finance products will limit the market’s potential. S&P Global expects issuance volumes to hover nearer $70-80 billion in 2018, according to the report. director at DSI.
“The completion of our debt restructuring in the UAE will enable us to accelerate projects performance and delivery in Dubai and Abu Dhabi.”
In August DSI ended a near three-year major order drought in Saudi Arabia when it was picked to help build a wastewater plant that will also generate biogas in the Eastern Province.
Saudi Arabia is emerging from a severe slowdown in the construction sector with builders expected to emerge as beneficiaries of increased government infrastructure spending in 2018.
Last month the Kingdom announced a record budget — with infrastructure spending surging more than 90 percent to SR54 billion ($14.4 billion).
The budget represented a dramatic turnaround for a sector that has been hit by massive losses and job cuts as the collapse of the oil price brought some big projects to a halt and major contractors to the brink of insolvency.
Al-Rajhi Capital Research said in a note that sectors including cement, real estate, construction and building materials would stand to benefit from any increase in capital spending.