After an absence of about 6 years, Drake & Scull International shares return to the Dubai Financial Market screen as of today, Wednesday, after attempts were made to confront the debt crisis through a restructuring plan. The company’s shares disappeared from the trading screen in mid-November 2018, due to losses resulting from several reasons, including a complete decline in the value of goodwill and brand, poor performance in old projects, where the actual costs of completing them were greater than the budgets, in addition to the banking ban on lending to it and lawsuits regarding it.
Losses began appearing on the company’s balance sheet during the third quarter of 2015, and were then posted to the Dubai Financial Market, and have cumulatively reached AED 5.5 billion ($1.5 billion) until March 31, 2024, according to a report by the board of directors of Drake & Scull International.
Since 2017, the company has been trying to address violations and losses caused by previous management, which resulted in an accumulation of expenses, fines, debts and legal cases. The company says it has faced operational, financial, legal and regulatory challenges that have placed significant pressure on operations and business continuity.
In November 2023, the company announced that the court had granted final approval to its restructuring plan in accordance with the plan agreed upon with the majority of creditors. The company said at the time that the court’s decision included a stay of all judicial and enforcement proceedings against it and its subsidiaries.
restructuring plan
To address the accumulated losses, the company has put in place a restructuring plan, which included the approval of creditors, including financial and commercial creditors, to write off 90% of their debt amounting to AED 3.4 billion. Creditors also agreed to replace the remaining debt amounting to AED 378 million, equivalent to 10% of their total dues, with mandatory convertible bonds after 5 years.
The plan also includes controlling general expenses at the best level, and following up on lawsuits to collect all the company’s receivables.
The company recently increased its capital by AED 454 million, exceeding the minimum proposed threshold for the plan’s success, which was AED 300 million. The company issued new shares to existing shareholders at a price of 25 fils, and the difference between the nominal value of AED 1 per share and the issue price of AED 0.25 will be recorded as an issue discount on shares in the balance sheet.
The company estimates that the restructuring process will increase total equity by AED 4.6 billion. The company says its future project portfolio amounts to AED 638 million and will be implemented between 2024 and 2028, explaining that operations are limited due to the inability to win new projects and the existence of large financial commitments. The company expects to relaunch its operations from the third quarter of 2024, allowing it to increase its project portfolio and operations. Drake & Scull International has also appointed BH Mubasher Financial Services as a liquidity provider (market maker) for its shares.
The reference price for the share at the start of trading today will be 0.25 dirhams and will be floated on the first day of trading, with price limits to be applied starting from the second day of trading, according to a statement by the Dubai Financial Market on Monday.
