Drake & Scull to write off 90% of its debt and convert rest into mandatory sukuk

Dubai-based contractor Drake & Scull International intends to write off 90 per cent of its debts and convert the remaining 10 per cent into mandatory convertible sukuk as part of a restructuring plan that has been approved by its creditors and shareholders.

The company obtained approval from creditors who account for 67 per cent of its total debt value, exceeding the threshold needed for the restructuring plan under the UAE’s Bankruptcy Law, DSI said in a statement yesterday to the Dubai Financial Market.

The plan is awaiting final approval in court.

“The company submitted a request to the competent court to approve the restructuring plan in accordance with the emergency financial crisis and to approve the procedures that has been submitted to the Financial Reorganisation Committee (FRC),” it said. The court appointed an expert to confirm the extent of the capability of restructuring and the reasons behind the company’s suspension of payments.

“The expert indicated that the company has the ability to resume its activities after completing the procedures, reasoning the current situation in light of the emergency financial crisis,” DSI said.

Prosecutors have accepted the request to open bankruptcy procedures for the company and agreed to proceed with the financial restructuring plan, it said.

The Cassation Court will give its final judgment on the matter on June 27, it added.

DSI’s accumulated losses as of the end of December 2022 increased to Dh5.098 billion ($1.38 billion), compared with Dh4.874 billion a year ago, it said this month.

Revenue last year reached Dh81 million, down from Dh150 million in 2021. Its order backlog stands at Dh454 million, driven by continuing operations in the UAE and overseas, it said.

“Once the procedures for the application submitted to the court are completed, the rest of the procedures agreed upon in the plan will be completed, including raising the company’s capital and submitting a request to return the company’s shares to trade in the Dubai Financial Market,” Shafiq Abdelhamid, chairman of DSI, said while announcing its results.

The company said in March last year that the FRC had confirmed the completion of its restructuring plan after DSI achieved the required voting percentage from its 600-plus creditors for a consensual agreement. The financial restructuring is the second that DSI has undergone.

In 2017, a capital restructuring took place that resulted in Dh1.7 billion worth of shares being cancelled to expunge historic losses, with private equity firm Tabarak Investment committing Dh500 million for a stake in the company.

In the third quarter of 2021, DSI also filed a formal application with Dubai Courts, requesting the company to be subject to restructuring procedures in accordance with the emergency provisions of UAE Bankruptcy Law.

DSI has also accused its previous management of falsely inflating asset prices ahead of the company’s initial public offering.

DSI filed a case with Dubai Courts to reclaim Dh830 million from them.

The case is continuing and DSI said yesterday that it will “announce any developments in a timely manner”.

DSI obtained approval from creditors who account for 67 per cent of its total debt value