Drake & Scull breaches terms of bank loans

The contractor Drake & Scull International has breached covenant terms of its sukuk and other loans, according to the company’s newly filed audited accounts.

The company had a conditional waiver in place with its lenders, but according to the accounts statement filed on the Dubai Financial Market it was unable to comply with reporting requirements that were a part of the waiver agreement. As a result, these loans can now be recalled on demand.

Payments on its bank borrowings are also overdue, it said.

The company was not immediately available for comment.

Notes to the accounts by auditors PwC state that a “material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”.

The company, which declared a loss of Dh732.9 million in 2016 (and a Dh826.6m loss the year before) as revenue shrank by 22 per cent to Dh3.3 billion, had a negative cash balance of Dh305m at year-end.

Accounts show that its gearing (debt-to-equity) ratio increased to 64 per cent (from 48 per cent a year earlier).

It also said that the company was owed Dh1.7 billion from customers on contracts relating to unapproved change orders and claims that remain the subject of continuing negotiations and discussions. Drake & Scull’s management has said that it considers the money owed to be “fully recoverable”.

Drake & Scull is attempting to raise funds in the form of a Dh500m rights issue that was announced last month, for which it has said it has a “binding offer” of support from Tabarak Investment – a Dubai funder chaired by the Saudi businessman Abdulwahab Al Shehri.

It has also just offloaded its stake in One The Palm – a luxury residential project on Palm Jumeirah – to its former joint venture partner Omniyat for Dh308m.

A letter to shareholders by the chairman Majed Al Ghurair stated that the company was “confident that the strength of our business model, the changes we have made to our management and the renewed focus on our clients and our operational excellence” would allow it to overcome current market conditions and deliver its backlog.

“Our main focus will be strengthening our capital structure and reducing our leverage level, securing new profitable work in our focus countries, delivering our order book at our forecast margins and recovering our working capital,” he said.

mfahy@thenational.ae

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