Contractor Drake & Scull files lawsuit claims of $2.8bn

Unsplash/Agnieszka Kowalczyk

• Suits filed against former managers and advisors
• Company aims to write off 90% of debt
• Losses in H1 rose to AED163m

Troubled Dubai contracting firm Drake & Scull International said on Tuesday that it has filed lawsuits with claims equivalent to more than AED10.3 billion ($2.8 billion) as it awaits court approval on its restructuring plan.

Chairman Shafiq Abdelhamid said in a filing to Dubai Financial Market that the lawsuits include civil cases filed against the former management of the company and against advisory firms.

He added that the company has also filed criminal cases with claims of over AED2.3 billion with public prosecution in Abu Dhabi and Dubai which are “still under consideration”. No further details about these were disclosed.

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Drake & Scull International (DSI) expects a ruling from the Court of Cassation on its long-running restructuring plan next week.

In April, the company said it intends to write off 90 percent of its debts and convert the remaining 10 percent into mandatory convertible sukuk. The proposal is backed by its creditors and shareholders under the UAE’s Bankruptcy Law.

“Once the procedures for the application submitted to the court are completed, the rest 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,” said Abdelhamid.

Trading in DSI’s shares has been suspended since November 2018 after it announced losses that exceeded 75 percent of its capital.

Lengthy restructuring

DSI has been locked in restructuring talks for more than a year.

Its accumulated losses increased to AED5.3 billion in the first half of 2023, compared with AED5.1 billion as of the end of December 2022. Losses are running at nearly 500 percent of the company’s paid-up capital.

Revenue for the first six months of the year reached AED45 million, the same as a year ago. However losses from continued operations rose to AED163 million from a loss of AED90 million during the same period in 2022. 

Unsplash/Carlvic Lim

The company said in the filing that these losses are linked to legacy projects in Oman, India, Saudi Arabia and the UAE that began to appear on DSI financial statements in the third quarter of 2015.

“Dealing with the accumulated losses plan is totally dependent on the successful completion of the restructuring plan,” said DSI CFO Fadi Mohamad Baraki in a separate filing to the DFM.

“The only pending point in closing is the court approval which was standing for more than a year now.”

Abdelhamid added the company would “make all possible efforts to ensure that DSI shares will resume trading on the Dubai Financial Market after the completion of the restructuring”. 

DSI’s six-month financial results also included an order book of AED410 million in the UAE and overseas, and a 30 percent reduction in costs to AED16 million.

In May, DSI said it had registered a lawsuit against global consultancy PwC over a AED5.5 billion black hole in the company’s accounts. The gap relates to a six-year period between 2011 and 2017 when PwC was auditor for DSI and also in charge of preparing a consultative report for restructuring the company and bringing in new investors.

DSI established a Middle East presence in 1966 with its first office in Abu Dhabi. It has worked on major projects across the GCC including the Louvre Abu Dhabi, the twisting Cayan Tower in Dubai Marina, Mall of Qatar and the HQ of the Kuwait State Audit Bureau.

DSI offered 55 percent of its shares to the public in 2008 and the IPO was oversubscribed 101 times. Ernst & Young ranked it among the top 20 global IPOs of that year.

Despite DSI’s ongoing woes, construction activity in the UAE rose by almost 50 percent in the second quarter of 2023. 

The increase in workload was driven by the country’s residential sector (up 55 percent). Commercial and infrastructure were also buoyant, with activity up 35 percent and 44 percent respectively, according to the Royal Institution of Chartered Surveyors’ Global Construction Monitor Q2 2023.