The retailer Damas may soon be able to focus on making the gold jewellery it is best known for rather than dealing with the restructuring of its finances.
The publicly listed retailer has signed a "facility agreement" to restructure its more than Dh3 billion (US$817 million) of debt, with 93 per cent of the outstanding amount owed to banks, it announced on the Nasdaq Dubai website yesterday.
The agreement was signed yesterday morning, said Anan Fakhreddin, Damas's chief executive. More than 20 banks are on board, but about four lenders have yet to sign on, said a source familiar with the matter.
"The other ones are getting it through the credit approval process" and are expected to sign on by the end of the month, the source said.
The restructuring deal presented to Damas's creditors would allow the company to repay Dh1bn over six years and use the rest as working capital, Mr Fakhreddin told The National last month.
Yesterday's agreement brings the Dubai company closer to moving past the debacle that has weighed on the retailer for more than a year.
Damas, which has more than 400 gold and jewellery stores across the Middle East, has been struggling since October 2009, when its chief executive stepped down after disclosing unauthorised transactions.
An investigation by the Dubai financial regulator found that the former chief executive, Tawhid Abdullah, and his brothers, Tawfique and Tamjid, conducted deals without proper shareholder approval. Those transactions, mainly in property and amounting to Dh614m, included investments in a shopping mall in Turkey and two tonnes of gold borrowed from Damas.
The transactions put pressure on the retailers' books, and Damas needed to secure a standstill on its debt payments to stay in business. It has had an official standstill with its lenders since March last year, and it has extended the agreement, for a sixth time, until the end of next month.
Although the company is closer to restructuring its debt, it still has to sign a "cascade agreement" with the Abdullah brothers on how they will repay the money they owe to Damas. Negotiations with the brothers, who are also members of the business's founding family, have been taking place alongside the debt restructuring. If a cascade agreement is not signed before March 31, the brothers will be required to repay Dh400m immediately.