Court gives Dubai’s Drake & Scull stay of execution

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• Contractor’s losses were AED5.3bn in H1
• Aims to write off 90% of debt
• Restructuring now in ‘final form’

Dubai contracting company Drake & Scull International (DSI) has received a reprieve from liquidation following the latest court ruling on its long-running restructuring plan.

DSI has been attempting to thrash out a restructuring proposal for more than a year. Its accumulated losses increased to AED5.3 billion ($1.44 billion) in the first half of this year, up from AED5.1 billion at the end of December 2022.

The company’s losses are running at close to 500 percent of its paid-up capital.

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At a hearing of the Court of Cassation on Wednesday, a previous ruling by the Court of Appeal surrounding the liquidation of DSI was revoked and the case was “referred back to the court for a new judgement”.

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.

Sukuk are sharia-compliant bonds that were developed as an alternative to conventional bonds, which are not considered permissible by many Muslims as they pay interest, and may also finance businesses involved in activities not allowed under sharia.

The proposal is backed by its creditors and shareholders under UAE bankruptcy law.

DSI said its restructuring process is in the “final form”.

Once complete, “the company will proceed with the procedures for raising the company’s capital and returning the share to trade, and carrying on its activity better than before, which guarantees to shareholders the restoration of their rights and the maximisation of their profitability”, according to a statement on Dubai Financial Market.

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

In a previous filing, the company said these losses were 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,” DSI CFO Fadi Mohamad Baraki said in the financial filing.

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

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.

DSI in May 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 headquarters 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.