Drake & Scull gains approval to resume trading on Dubai bourse

• Share capital rising by AED600m
• 2.4 billion shares at discount
• ‘Covered by future profits’

Drake & Scull International has been given the green light to resume trading on the Dubai Financial Market, after an absence of more than five years.

The decision from the Securities and Commodities Authority follows the Dubai contractor agreeing to increase its share capital by up to AED600 million ($163 million), as part of a court-approved restructuring plan.

Under a special resolution to be discussed at a general assembly meeting on March 27, shareholders will be asked to agree to the issuing of 2.4 billion new shares at a heavily discounted price of AED0.25 – Drake & Scull International shares have a nominal value of AED1.

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This would lead the share capital of the company to become the equivalent of up to AED3.5 billion, up from AED1.1 billion.

In a note to the Dubai bourse on Wednesday, Drake & Scull said the difference in the share prices would “be covered by the company’s future profits” and the company would “not distribute any profits until this reserve is covered”.

The resumption of trading on the Dubai market will also be discussed at the general assembly meeting.

Shafiq Abdelhamid, chairman of Drake & Scull, said this was an “important phase of bringing the company back stronger”.

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Under the restructuring plan agreed with the Securities and Commodities Authority, any capital increase must be no less than AED300 million.

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

At the time of its suspension, its stock was down 64 percent on its 2008 IPO price of AED1.02 per share and its market cap was AED396 million.

During a lengthy legal battle, a lower court had ruled that the company should be placed into liquidation. This was overturned and the business was given one year to turn things around.

The restructuring was backed by creditors and shareholders in April last year under UAE bankruptcy law. It agreed to write off 90 percent of the company’s debts. The remaining 10 percent will be changed into a sukuk offering.

Sukuk are shariah-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 finance businesses involved in activities not allowed under Islamic law.

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