Construction

Drake & Scull beaches covenants on sukuk, bank loan facilities

Dubai-listed contractor in talks with lenders to find new solutions on the debt facilities in question

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Drake & Scull (DSI), the Dubai-based contracting giant, has said that that it has breached covenants on a syndicated sukuk and other bank loan facilities after making a loss in 2016.

The building firm is in talks with lenders now to find new solutions on the debt facilities in question, which are overdue on principal and interest payments, and are technically payable on demand.

However, banks have not claimed the overdue payments and are unlikely to do so until new agreements are reached involving refinancing solutions or a renegotiating of existing debt, a Reuters report said, citing a source familiar with the situation.

DSI has yet to respond to a request for comment made by MEConstructionNews.com.

The contractor was already in breach of financial covenants on a number of bank facilities in 2015, but it reached an agreement for a conditional waiver of the breach up until December 2016. However, it was unable to comply with reporting requirements requested by its lenders, and therefore was in breach of the covenants again, it said.

The covenants are revised on a quarterly basis.

In February 2017, DSI announced a turnaround and capital restructuring plan, which included several 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 told Reuters.

In February CEO Wael Allan told Big Project ME that the contractor will look to refocus its regional strategy and capabilities on its MEP offerings.

In the wake of the contractor posting its financial results for the fiscal year 2016, Allan said that DSI would be looking to build a clear path of sustainable growth, driven mainly by the core mechanical, electrical and plumbing (MEP) business.

The company posted a net loss of $214.2 million for the period, compared to a net loss of $255.6 million reported in the fiscal year 2015.

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