Damas International, the region's largest jewellery chain, reaches a standstill agreement on Dh3.2 billion it owes to banks.
Damas and banks forge debt deal
Damas, the largest gold and jewellery retailer in the region, has reached a standstill agreement on Dh3.2 billion (US$871.2 million) of debt with the majority of its bank lenders, it announced today. The agreement comes a week after Dubai's financial regulator imposed unprecedented fines and sanctions on the retailer. It also comes about three months after Damas said it needed to reach a standstill on its debts and restructure in order to stay in business.
The deal will enable the Dubai-based retailer, which has more than 450 stores worldwide, to move forward with its restructuring plan, which will be put in place after the standstill period, Damas said. "This agreement is also noteworthy in that it not only validates Damas's long-term business strategy and strong fundamentals but also highlights belief in the new systems and structures being established within the company to ensure compliance with the highest standards of corporate governance," a company spokesman said.
Damas had an informal standstill on repayments of principal on its loans involving more than 20 bank lenders since November but had been pushing for months for a formal agreement, said a source familiar with the matter. One proposal was to defer all payments on loan principals until May 31, with the deferred amounts still accruing interest, the source said. However, negotiations dragged on as two investigations into unauthorised transactions by the members of the founding Abdullah family were carried out by the Dubai Financial Services Authority (DFSA) and PricewaterhouseCoopers.
Tawhid Abdullah resigned from his post as Damas's chief executive last October after disclosing "unauthorised transactions" involving company funds. Last week, the DFSA concluded that Tawhid and his two brothers, Tawfique and Tamjid, made unauthorised withdrawals from company accounts for personal use and investments without the proper approval of the board of directors or shareholders. The DFSA dissolved the company's board of directors and imposed a record fine on Damas as a company. The Abdullah brothers were also hit with fines, and have been banned from executive or managerial positions in any company operating in the Dubai International Financial Centre for between five and 10 years.