Dubai engineering firm Drake & Scull seeks 90% write-off on debt in restructuring plan

Dubai: The Dubai based engineering firm Drake & Scull International expects to see a 90 per cent write-off of its debts as part of a restructuring plan that needs to be approved by a local court. Money owed to government and those related to ‘labour rights’ will be paid in full to ‘reach a debt amount equal to zero’ as part of the plan.

“Once the procedures of the court (is) completed, the rest of the procedures agreed upon in the plan will be initiated, including raising the company’s capital and submitting a request to return the company’s stocks to trade in the Dubai Financial Market,” Drake & Scull said in a statement.

So, everything vests with what the court in Dubai will decide. The company had spent the better part of two years to put together the restructuring plan, including extended negotiations with creditors and lenders. Project are still ongoing, but there is the constant shadow of accumulated losses at more than Dh4 billion.

On its part, Drake & Scull seems confident that the plan will work. “The Board of Directors confirm the positive effect of the approval of the restructuring plan on the national economy. We are more than ready to provide all the related documents and findings if needed.”

Court verdict?

As things stand now, the Dubai Court had adjourned a hearing on the matter until October 24. It has requested the Public Prosecution’s opinion on an expert’s report that looked into the Drake & Scull saga. In 2018, the company’s then management revealed that legacy losses were far higher than what was showing on the books and that this could be in the region of Dh4 billion. (The stock had been suspended from trading on DFM for some time now.)

Expert comment

It was in April this year that the Dubai Court of Appeal ordered the appointment of an external accounting expert to evaluate the company’s financial position. And to clarify the reasons that led to the stopping of debt payments. The report was submitted, which confirmed the ‘ability of the companies to implement the restructuring plan’.

According to construction industry sources, a 90 per cent write-off may be unprecedented, but add that Drake & Scull could have provided the proof required that it can remain a going concern without the debt overhang. "If the majority of creditors and lenders have bought into the company's plan, that's extra credibility," said the source. "The upcoming verdict will thus be quite influential for future cases too."