Drake & Scull completes restructuring milestones, eyes future projects

Drake & Scull International, a Dubai-based construction contracting firm, has successfully navigated significant restructuring milestones, setting the stage for a fresh start and renewed participation in the real estate market.

The company, which resumed trading on the Dubai Financial Market (DFM) after a five-year gap, is now primed to bid on new projects following the completion of its financial restructuring, as per its official statement.

Restructuring plan approved by courts

The restructuring plan, sanctioned by the courts, involved debt reduction strategies.

As part of the plan, Drake & Scull has written off 90 per cent of its existing debt. The remaining 10 per cent will be addressed through the issuance of mandatory convertible sukuk (bond), which will convert into shares five years from the issuance date.

This approach allows Drake & Scull to handle its obligations while preserving liquidity for operational growth.

“We have issued mandatory convertible sukuk to our creditors, aligning with the restructuring plan. This move is pivotal for the financial stability and future growth of Drake & Scull,” stated Shafiq Abdul Hamid, chairman of the Board of Directors at Drake & Scull, as per state news agency WAM.

He highlighted that this restructuring would enable the company to re-enter tenders and secure new projects, thereby enhancing its profitability and asset base, added the report.

Financial stability and capital increase

Drake & Scull’s restructuring also includes a significant increase in its new capital, exceeding Dhs450m.

This capital boost has been formally approved by the Securities and Commodities Authority. Additionally, the company has managed to clear Dhs4.18bn ($1.12bn) in financial and commercial debts, a significant relief that will be reflected in its Q2 2024 financial statements.

“This is a major achievement that opens new opportunities for the company to expand its operations both domestically and internationally. It positions us to enhance profitability, assets, and shareholders’ equity,” Drake & Scull said in its statement.

Cash settlements amid court oversight

For creditors holding debts under Dhs1m, Drake & Scull said it has initiated cash settlements totaling Dhs13.6m. These settlements are supervised by an expert appointed by the court, ensuring transparency and fairness in the process.

The company continues to address numerous claims in the market through both direct settlements and litigation, as part of its ongoing efforts to stabilise and strengthen its financial position.

A return to market amid challenges

Drake & Scull‘s return to trading on the DFM follows protracted negotiations with lenders and trade creditors, coupled with extensive court battles and a complete overhaul of its management structure. The company faced significant challenges during the 2014 oil price slump, which had a severe impact on the regional property and construction sectors.

Trading of its shares was suspended in November 2018 following substantial financial losses.

However, in 2022, the company reached a consensual agreement with over 600 creditors, facilitating the completion of its restructuring plan.

Event timeline:

1. 2014-2017: Oil price slump impacts regional property and construction sectors.
2. November 2018: Trading of shares suspended due to financial losses.
3. 2022: Drake & Scull completes its restructuring plan with over 600 creditors.
4. March 2024: Accumulated losses stand at Dhs5.5bn.
5. May 2024: Drake & Scull returns to trading on DFM.
6. June 2024: Completion of restructuring milestones and issuance of mandatory convertible sukuk.

Future prospects

Looking to the future, Drake & Scull said, it expects the positive outcomes of its restructuring efforts to become evident in the second quarter of this year.

“The restructuring allows us to write off Dh4.18bn from our accounting records, paving the way for new bids and operational expansion,” added Hamid.

As the construction firm moves forward, its successful restructuring marks a significant turnaround, allowing the company to focus on growth and new business opportunities in the Middle East market.

Read: Dubai’s Drake and Scull says previous management ‘hid losses’ from shareholders