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UPDATE 1-Dubai's Drake & Scull breaches covenants on sukuk, other bank facilities
March 30, 2017 / 12:31 PM / in 4 months

UPDATE 1-Dubai's Drake & Scull breaches covenants on sukuk, other bank facilities

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By Davide Barbuscia, Tom Arnold and Hadeel Al Sayegh

DUBAI, March 30 (Reuters) - 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 on demand.

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 quarterly basis.

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)

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