Drake & Scull will have a 12-month timeframe to launch its ambitious program to finally turn things around. And pay back what's owed... Image Credit: Supplied

Dubai: As the Dubai engineering firm Drake & Scull starts on its turnaround plans, the scale of the challenges it faces is clear – pay off more than Dh3.8 billion to a mix of banks, creditors and labour.

Among those who are owed include HSBC Bank Middle East (Dh323.6 million), ADCB (Dh296.2 million), Emirates NBD (Dh261 million), Doha Bank (Dh230 million), FAB (Dh65 million), National Bank of Fujairah (Dh89 million), Mashreq Bank (Dh94 million), Emirates Islamic Bank (Dh150 million), and Banque Saudi Fransi (Dh175 million).

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Recently, a Dubai court had given the clearance to Drake & Scull – one of the biggest players in the UAE construction sector at one point in time – to proceed with the restructuring.

This applies to the parent entity DSI, as well as Drake & Scull International llc – Abu Dhabi, Drake & Scull for contracting Oil & Gas Fields Facilities lllc, and Drake & Scull Engineering llc.

At the time, these companies were granted up to 12 months from the final creditor list being confirmed to implement the plan.

“This period may be extended according to the progress of the restructuring proceedings and the actual situation at the time,” a statement further added.

Drake & Scull's two-plan strategy
Drake & Scull plans two 'major steps' in the restructuring plan - raise new equity and issuing a mandatory convertible sukuk.

These are to be completed by end of Q2-24 and well ahead of the the 12-month period given by the court.

"In parallel, we are already working towards the healthy coming back of the company into the market," said a DSI source. "For the MEP business unit, we believe that the time could not have been better considering the volume of work in the UAE market and the scarcity of first-tier MEP contractors.

"The water business unit of DSI (Passavant) has been increasing its project intake and has a healthy backlog of more than Dh400 million (excluding expected new awards that will be announced soon).

"The oil and gas business unit has been active in Iraq, participating in EPC bidding including a recent bid at Al Yamama field. We anticipate coming back to bid for ADNOC Group (projects) in a few months...”

Can DSI do it?

In recent months, Drake & Scull had won contracts, proceeded with ongoing projects and made the push to pick up more work. All this while the shadow of the Dh3 billion plus in owed sums was in the background. At various points over the last few years, there was a real danger of the company going into liquidation. This was stayed by the Dubai court last year and the space provided for the turnaround plan to be implemented.

"There's one thing DSI can call on - fairly heavy construction and project activity that will continue in the UAE," said a project management consultant. "DSI still has the human resources to take on projects, and they only need to convince this can be done on time and on budget.

"If the DSI turnaround plan works, it would rank as one of the biggest corporate turnarounds in the UAE."

Legal industry sources say the best part of the recent court verdict was allowing the company 12 months - and then, the scope to extend it if things are seen to run smoothly.

There is also precedence that local courts have in such liquidation cases. There is the obvious example of NMC Healthcare in Abu Dhabi, which is currently under a management placed there by creditors, including ADCB.