Drake & Scull expects to restructure Dh1 billion of Saudi debts by March

Drake & Scull International expects to finalise restructuring of approximately Dh1 billion of debt it raised for projects in Saudi Arabia by March-end this year. It will begin negotiations with bondholders in the UAE to refinance Dh440 million worth sukuk in the second half of 2018, the company said yesterday.

The Dubai contractor, which was hit hard by a slowdown in the Arabian Gulf economies, has already reached an agreement with a group of nine lenders to refinance Dh566m of corporate debt.  Under the deal agreed in the fourth quarter of 2017, the banks on average have extended the maturities by three years on loans, representing 56 per cent of the company's total corporate general debt, which at the end of September last year stood at Dh1.07bn, DSI said in a statement on the Dubai stock exchange, where its shares are traded. 

The company has secured new credit lines and working capital facilities for its ongoing and new projects portfolio. The Dh440m sukuk, due to mature in November 2019, makes up the remaining tranche of the DSI's corporate general debt, it said. The DSI group's total bank debt at the end of the third quarter of 2017 had reached Dh2.92bn.

DSI’s shares surged 6.5 per cent in early trading before losing momentum, ending the day down 0.4 per cent at Dh2.29.

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The company launched a recapitalisation programme early last year in the face of mounting losses, with Dubai-based investor Tabarak Investment becoming the company's largest shareholder through an investment of Dh500m.

"The latest deal with the banks reflect the confidence in the DSI turnaround plan, the resilience of the group's business model and the positive outlook of the company in the MEP [mechanical electrical and plumping] sector, despite the cyclical challenges that impacted the regional construction industry," said Rabih Diwan, DSI's investor relations director.

“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.”

DSI posted a Dh318m loss for the third quarter of 2017, as contract revenues declined by a third year-on-year and general and administrative costs almost doubled.