Dubai’s Atlas Jewellery still struggling to resolve debt issues

Three banks are blocking a deal aimed at resolving the close to Dhs500m ($136.1m) debt troubles of Dubai-based Atlas Jewellery, banking sources said.

Atlas, which once had more than 50 retail branches across the Gulf and India, defaulted on loans in 2015 and its owner, M M Ramachandran, was sentenced to a three-year jail term for writing cheques without sufficient funds for them to clear.

Since then banks have struggled to secure repayment, leading to the United Arab Emirates central bank trying to broker a deal that would put on hold legal action against Ramachandran so he could be released from jail to facilitate asset sales to repay banks while restructuring the company’s remaining debt, the sources said.

The majority of the 22 or so creditor banks have signed up to the agreement, but Union National Bank, Mashreq and Qatar’s Doha Bank have declined, the sources said.

Representatives of the banks and Atlas Jewellery were not available to comment. The UAE central bank declined to comment.

The lack of consensus on how to proceed stems from UAE insolvency laws that make it difficult for lenders to seek legal redress against defaulters. Loan default, which is a civil matter in most Western jurisdictions, is treated as a criminal offence in the UAE.

Only about Dhs35m of Atlas Jewellery’s debt has been repaid to banks, with about Dhs480m still to repay, said one of the sources.