Drake & Scull International Sets Path For Revival With Approved Restructuring Plan And Capital Increase

In a significant move aimed at revitalizing its financial structure, Drake & Scull International PJSC convened its General Assembly on April 1, 2024, where a pivotal decision was made to enhance the company's share capital by AED 600 million, escalating it to approximately 3.470 billion dirhams. This financial maneuver involves the issuance of 2.4 billion shares, each priced at 0.25 dirhams, marking a crucial step in the company's capital restructuring strategy.

Eng. Shafiq Abdelhamid, Chairman of the Board of Drake & Scull International PJSC, reflected on the company's journey, acknowledging the challenges faced and the collective efforts made to steer the company back to its leading position in the market. The capital restructuring plan, as outlined by Abdelhamid, is designed to avert liquidation while prioritizing shareholder interests and ensuring business continuity. This strategy is not only expected to yield better returns for creditors but also bolster the national economy and reinforce confidence in the financial market.

The company's restructuring strategy zeroes in on leveraging its core competencies in mechanical and electrical works (MEP), water and environment operations through "Passavant", and the Oil and Gas sector. This focus is part of a broader effort to re-establish trust in Drake & Scull's capabilities and potential.

The restructuring plan encompasses four entities collectively referred to as "Plan Companies", which have received court approval. These include Drake & Scull International PJSC, Drake & Scull International LLC, Drake & Scull Engineering LLC, and Drake & Scull for Contracting Oil & Gas Fields Facilities LLC. A significant aspect of this plan is the agreement by creditors to write off 90% of their claims. The remaining balance will be addressed through a Mandatory Convertible Sukuk (MCS), with varying options for creditors based on their claim sizes.

The MCS, set to be issued for a five-year period, introduces an innovative approach to creditor compensation. Upon maturity or under certain conditions allowing early conversion, these instruments will be converted into shares of Drake & Scull. Importantly, MCS holders are entitled to a share of any dividends distributed by the company and will ultimately acquire 35% of its issued capital at maturity, subject to adjustments.

The capital restructuring process is marked by several key milestones:

• April 1st, 2024: Approval of Capital Increase by the General Assembly
• April 4th, 2024: Official Announcement of Capital Increase
• April 25th, 2024: Opening of Subscription Period
• May 10th, 2024: Closing of Subscription Period
• May 16th, 2024: Allocation of New Shares
• May 21st, 2024: Resumption of Share Trading
• May 31st, 2024: Issuance of MCS
• June 2024: Initiation of Claim Settlement Process for Small Creditors

This structured approach not only aims at stabilizing Drake & Scull's financial standing but also sets a precedent for how companies can navigate through financial distress while maintaining operational continuity and safeguarding stakeholder interests.

With inputs from WAM