Appeal court green lights Drake & Scull restructure

Shutterstock/Kateryna Galkina

• Court gives DSI one year to resolve issues
• Write off of 90 percent of debt
• Remaining 10 percent changed into sukuk

Dubai’s court of appeal  has approved a plan to restructure the troubled Dubai construction contractor Drake & Scull International (DSI).

In what has been a lengthy battle through the courts, a previous verdict had called for the company to be placed into liquidation. This has now been overruled, and the court has given DSI one year to turn around its ailing fortunes.

The latest ruling from the court said: “This period increases according to the progress of the restructuring procedures and the necessity of the situation at the time.”

It will start “from the date of determining the final list of creditors”.

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

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The restructuring plan, which was backed by the company’s creditors and shareholders in April this year under the UAE’s bankruptcy law, will see 90 percent of DSI’s debts written off and the remaining 10 percent changed 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 also may finance businesses involved in activities not allowed under sharia.

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

The ruling included the appointment of an expert to oversee the restructuring procedures.

The court also ordered a stop to all judicial procedures against the company and its subsidiaries, and the cessation of all execution procedures against them.

Profit and loss

Shafiq Abdelhamid, chairman of DSI, said: “I have previously stated my personal commitment, along with my fellow board members of DSI, to working hard, by all means, to restore some of the rights of shareholders who were harmed by the decisions that were previously taken in the company by its previous management either through the plan that was developed to restructure the company and settle its debts in accordance with the provisions of the law, or through a fair and impartial judicial process to demand compensation from the previous management for these damages.”

DSI’s accumulated losses increased to AED5.3 billion ($1.44 billion) in the first half of 2023, from AED5.1 billion as of the end of December 2022.

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

In August, DSI revealed that it had filed lawsuits with claims equivalent to more than AED10.3 billion, including civil cases filed against the former management of the company and against advisory firms.

PwC under fire

Abdelhamid said that the company had also filed criminal cases with claims of more than AED2.3 billion with public prosecution in Abu Dhabi and Dubai which were “still under consideration”.

In May, DSI said it had registered a lawsuit against the 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.