The Abdullah brothers say they have registered 350 million Damas shares with NASDAQ Dubai in the event that they are unable to pay back US$165 million (Dh606.1m) in unauthorised transactions made at the region's largest gold and jewellery retailer. The move by the majority owners of the Dubai-based company was aimed at reassuring investors, said Mala Pancholia, a senior analyst at Al Mal Capital in Dubai. The shares have fallen 55.4 per cent since Tawhid Abdullah resigned as the Damas chief executive on October 12.
"They are trying to bring confidence back into the stock," Ms Pancholia said. "All they are trying to do is say they are committed and going to pay back the money." Mr Abdullah resigned after disclosing that the company had made the unauthorised transactions, most of which were property deals. The transactions involved at least 50 deals, including investments in the Angsana Hotel and Suites, twin 49-storey towers on Sheikh Zayed Road in Dubai, and a stake in the Bupa Cromwell hospital in London, said an informed source.
On November 4, the Abdullah brothers - Tawhid, the Damas chairman Tawfique and the company's deputy managing director Tamjid - agreed to pay the $165m over the next 18 months. In the event that they failed to repay Dh200m within six months, Dh400m within 12 months and the full amount within 18 months, the Abdullah brothers pledged to return 350 million of the 515 million shares they own. This was formalised into a legally binding agreement yesterday through registration on NASDAQ Dubai.
"The Abdullah brothers have signed a formal settlement agreement under which they will repay Dh200m to Damas every six months," a Damas spokesman said. "In addition, they have pledged 350 million shares to Damas if the terms of the settlement agreement are not met in full." Ms Pancholia said that if these shares are returned, it would reduce the Abdullah's share in the company from more than 51 per cent to 16 per cent.
At Damas's current share price of US 16.5 cents each, the 350 million shares are worth $57.7m. "Although they are giving the $60m as commitment, there may be other measures or the sales of their real estate assets which could make up the shortfall," Ms Pancholia said. "It could be that the assets they sell could produce the $165 million and they don't have to give up their shares." The share pledge comes weeks after Damas released its six-month results for the period ended in September, in which it reported a loss of Dh714.9m. Its retail business remained profitable, with Damas reporting a gross income of Dh320m, but large write downs of loans and investments pushed the company into net losses. Damas said it must secure a debt standstill and restructure the firm to remain in business, and seek to recoup Dh300 million from an investment unit of the Dubai Government's Dubai Holding.