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Dubai contractor Drake & Scull (DSI) will focus on mechanical electrical and plumbing (MEP), oil and gas projects as well as wastewater treatment through its German subsidiary as it emerges from a restructuring process that spanned nearly six years.
Initially, DSI will focus on its home market, which is the UAE, said vice chairman Ahmad Kilani, although he did not rule out returning to other GCC markets in the future.
Kilani said that DSI will focus on its core market and work smaller and faster. Issues faced by DSI include lack of financial capacity to price projects and lack of trust.
The company, which saw its losses spiral to AED 5 billion ($1.3 billion) in 2018, resumed trading on Dubai Financial Market (DFM) last month after an absence of five and a half years.
During its time away from DFM it has negotiated with 1,296 creditors and undergone a court approved restructuring process, eventually writing off AED 3.8 billion in losses and issuing a mandatory convertible sukuk to creditors.
Adam Fadian, partner of law firm Allen and Overy described it as ‘a landmark transaction for the region’.
DSI had no real prosect of reaching an agreement with creditors prior to the process, he said, in a bankruptcy regime that was untested and under which no company wanted to be the test case.
Previously, restructuring was done on a consensual basis with agreement from creditors.
DSI’s mandatory convertible sukuk was also a relatively new procedure introduced in 2020 during COVID-19, which was a pivotal moment.
Fadian said a positive outcome was that there were wider ramifications in the market, showing a path for other companies to follow and creating confidence and predictability in the process, which he said was important in attracting international capital including debt funds to provide capital to distressed companies.
“More important than that, is the impact that this is going to have on companies, negotiations, and creditors because there is a demonstrable plan B that can be implemented. Drake & Scull have demonstrated it can be done, and I think it’s a real game changer in shaping these processes going forward,” he said.
“This may result in more restructurings being done consensually now that everyone knows that there is a viable plan B out there,” Fadian added.
(Reporting by Imogen Lillywhite; editing by Seban Scaria)
