(Adds context, details)
By Davide Barbuscia, Tom Arnold and Hadeel Al Sayegh
DUBAI, March 30 Dubai-based building company
Drake & Scull (DSI) said on Thursday it had breached
covenants on a syndicated sukuk and other bank loan facilities
after making a loss last year.
The contractor is in talks with its lenders to find new
solutions on the debt facilities in question, which are overdue
on principal and interest payments and are technically payable
Banks have not claimed the overdue payments and are unlikely
to do so until new agreements are reached involving refinancing
solutions or a renegotiation of the existing debt, said a source
familiar with the situation.
No one at DSI could be reached for comment.
The company was already in breach of financial covenants on
a number of bank facilities in 2015. It then reached an
agreement for a conditional waiver of the breach up until
December 2016, but it was not able to comply with reporting
requirements requested by its lenders and therefore had breached
the covenants again, it said. The covenants are revised on a
In February this year it announced a turnaround and capital
restructuring plan which included a number of cost-cutting
measures, capital raising initiatives, and divesting
non-performing or distressed subsidiaries.
Lenders are now waiting for more details of the capital
restructuring programme, banking sources said.
DSI made a loss of 815.3 million dirhams ($222.01 million)
last year as low oil prices and an economic slowdown hit the
construction sector in the Gulf region.
In particular it was hit by problems related to projects in
Saudi Arabia. As of the end of December, DSI’s net current
liabilities exceeded its assets by 118.9 million dirhams.
DSI issued a $120 million five-year sukuk in 2014 with Al
Hilal Bank, Emirates NBD, Mashreqbank and Noor Bank as joint
lead managers. That sukuk is held by banks only and never
traded, said one source familiar with the situation.
It approached lenders for a senior perpetual sukuk in 2015
but that deal never materialised because of lack of appetite in
the market, banking sources said.
(Editing by Greg Mahlich)