Drake & Scull to resume trading on Dubai bourse in May

Wam

Dubai contractor Drake & Scull International (DSI) expects to resume trading on the Dubai Financial Market on May 21 following a five-year suspension.

Trading came to a halt in November 2018 when the company disclosed losses exceeded 75 percent of its capital.

At the time of its suspension, the stock had fallen 64 percent from its 2008 initial public offering (IPO) price of AED1.02 ($0.28), with a market capitalisation of AED396 million.

During the annual general meeting on Monday, shareholders approved the board’s capital restructuring plan.

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The plan includes raising the capital by AED600 million to AED3.5 billion by issuing 2.4 billion new shares at AED0.25 per share – heavily discounting from its nominal value of AED1.

“We have developed a comprehensive capital restructuring plan aimed at avoiding the liquidation of the company,” state-owned Wam news agency reported, quoting Shafiq Abdelhamid, chairman of DSI.

He added that this will ensure business continuity and achieve better returns for creditors compared to the returns in case of liquidation.

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Abdelhamid said that the company “still has a long way to go, but is determined to restore its solid position in the construction sector, as the real estate market in the region, especially in the UAE, witnesses steady growth”.

The restructuring plan aims to focus on the company’s core strengths, such as mechanical, electrical and plumbing, water and environment operations and the oil and gas sector.

The restructuring initiative has four entities, with creditors agreeing to a 90 percent write-off of their claims. For the remaining 10 percent balance, creditors with claims exceeding AED1 million will receive mandatory convertible sukuk.

Those with balances between AED50,000 and AED1 million can opt for cash or sukuk, while creditors below AED50,000 will receive 10 percent in cash. 

The sukuk, issued for a five-year term, will convert into DSI shares at maturity or earlier, subject to specific early conversion events. 

The sukuk will not be eligible for a fixed profit rate but is entitled to a share of dividends. At maturity, the sukuk will receive 35 percent of DSI’s issued capital, subject to buyback terms.

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

The subscription period for the capital increase will start on April 25 and conclude on May 10. The new share allocation will take place on May 16.  

The sukuk will be issued on May 31, followed by the commencement of settling claims of small creditors, employees and government dues in June 2024. 

The restructuring was backed by creditors and shareholders in April last year under UAE bankruptcy law.  

In its preliminary financial results for 2023, DSI reported a net loss of AED352 million, 57 percent worse than the AED224 million loss the previous year.