Dubai’s Drake & Scull breaches covenants on sukuk, bank facilities

Dubai-listed contractor Drake & Scull International (DSI) has breached its financial covenants in relation to a syndicated sukuk and other borrowing facilities, the contractor said in its financial statement on Thursday.

The firm was not able to comply with reporting requirements set by lenders for a conditional waiver up to Dec. 31, 2016, and hence breached the covenants.

“These breaches have rendered the loans to be technically payable on demand. In addition to the breach, the related bank borrowings are currently overdue on their principal and interest payments,” the statement said.

DSI swung to a net loss of AED 815 million in 2016, mainly attributed to challenging market conditions, operational challenges, and a slowdown in the overall construction sector.

Delays in collections affected the firm’s working capital, leading to an increase in debt level. This in turn resulted in higher financing costs during 2016.

Looking ahead, the contractor will focus on strengthening its capital structure and reducing leverage level, securing new orders in its core markets, delivering its orderbook at forecast margins, and recovering working capital, the statement said.

DSI’s board of directors announced a recapitalization program last month to raise capital for ongoing and future funding requirements.

Under the program, the firm secured a binding offer from United Arab Emirates-based Tabarak Investment to inject AED 500 million in new capital in the group.

The company also said in February that it is seeking regulatory approval for or a 50 percent capital reduction. The capital cut through the cancellation of shares will be on a pro-rate basis at a 2:1 ratio and apply to all shareholders.

The DSI stock was last trading 1.4 percent lower at AED 0.44 on the Dubai Financial Market.

Write to Jerusha Sequeira at jerusha.s@argaamnews.com