Drake & Scull International (DSI), a regional engineering and services leader, said it has won approval from shareholders on the proposed capital restructuring programme which will see the company pursue a two-pronged strategy with additional capital reduction in the first phase and endorsement of Dh500-million ($136 million) capital increase in the second phase.

The company obtained shareholders’ nod for the restructuring programme at the annual general assembly meeting held on May 4.

The Dubai builder said it had already won the approval from the Emirates Securities and Commodities Authority (SCA) for its proposed share capital reduction of Dh992 million ($270 million). During the meeting, the shareholders too backed the proposal, it stated.

Subsequently, they requested for an additional capital reduction of Dh722 million ($197 million) to extinguish additional losses incurred by the company, said the statement from Drake and Scull.
 
This will take the total proposed share capital cut to Dh1.7 billion ($462 million), which is equivalent to 75 per cent of the total paid-up share capital, it added.

Drake and Scull pointed out that Phase One of the programme, which includes the share capital reduction, is expected to be completed by the second quarter.
 
The 75 per cent share capital cut will enable the company to extinguish its total accumulated losses attributed to the owners of the parent firm, it stated.

The reduction is imperative to the continuity of the business and will allow the company to eliminate the financial constraints that hinder the operating performance of the group and impact the ability of the company to secure new work.
 
Unveiling the new strategy, the top Dubai builder said the completion of Phase One (Capital reduction) of the capital restructuring program will enable the company to successfully execute Phase Two (Dh500 million capital increase); a critical and strategic endeavour that is equally important and essential to resolve the liquidity challenges of the company.

Upon SCA approval, the proposed capital reduction through the cancellation of 1,714 million shares will be on a pro-rata basis and will apply to all DSI shareholders.
 
Under the second phase of the restructuring plan, the shareholders approved the Dh500 million capital hike and conceded to offer the new shares to the strategic investor.
 
The strategic investor, inturn has agreed to buy 500 million shares at par value (Dh1 per share) for an amount of Dh500 million subsequent to the approval of the SCA on the proposed 75 per cent capital reduction.
 
The capital hike plan will be implemented once the SCA gives approval to Phase One, said a top official.

"We are confident that the completion of the capital restructuring program will enable us to stabilise the business and help to resolve our financial challenges," remarked CEO Wael Allan.

“We are undertaking several strategic measures to improve our operations, control costs and eliminate inefficiencies affecting our business across all operating segments. We will continue to focus on our core competencies in the UAE market in the MEP sector and we expect to resolve our legacy issues in 2017 to set a solid foundation for recovery and sustainable growth," he added.
 
Drake & Scull said it expects to complete the capital restructuring program in the first half and is concurrently implementing several strategic measures to improve the operational performance of the group in core markets in the MEP sector.

During the first quarter, the group progressed successfully with its divestment program and disposed of a major non-core asset to generate immediate cash for the business.

The divestment program is set to continue throughout the fiscal year and will further contribute to resolving the liquidity challenges of the group, it added.-TradeArabia News Service