Damas International, the gold and jewellery company, is expected to reach a standstill agreement with creditors for Dh3.2 billion (US$871.2 million) of debt within three weeks, informed sources say.
Damas debt deal expected soon
Damas International, the gold and jewellery company that was subject to action by the Dubai financial regulator, is expected to reach a standstill agreement with creditors for Dh3.2 billion (US$871.2 million) of debt within three weeks, informed sources say. A standstill agreement has been distributed to about 20 banks that are owed money by Damas, the sources said.
The move would be a welcome relief for the company after a difficult six months and allow it to progress with a restructuring plan. Tawhid Abdullah, one of three brothers who controlled the publicly traded company, resigned as its chief executive last October after revealing "unauthorised transactions" with the company's money. The brothers owe Dh365m in cash and the nearly two tonnes of gold that were taken from Damas. The money was used for personal investments, mostly in property.
The Dubai Financial Services Authority (DFSA) this week imposed sanctions on the company and the Abdullah brothers for failing to appropriately disclose the transactions or gain approval for them from shareholders. A standstill was expected as early as January this year, but negotiations have dragged on as dual investigations into the Abdullah brothers' transactions were carried out by the DFSA and PricewaterhouseCoopers (PWC).
Last month the company had a management shake-up, with Hisham Ashour replaced as the chief executive by Sanjay Kalsi, who was previously the chief financial officer. Damas, the largest gold and jewellery retailer in the Middle East, has already begun implementing a restructuring programme that would see the number of stores in the region reduced and aggressive expansion plans put on hold. Last year, the company announced plans to open 100 stores in India, including 30 this year, but the local partner has yet to receive any funds from Damas.
PWC, a major accounting and financial consultancy, has played more than one role at the company since Tawhid Abdullah's resignation. It was first hired as the forensic investigator of the transactions, reporting to two Damas board members and the DFSA. Last month, it seconded Sanjay Macchanda, a PWC partner, to Damas to serve as the chief restructuring adviser. The company has also been hired as financial adviser to Damas and the informal steering committee of its lenders, which comprises Standard Chartered, HSBC, Emirates NBD, Mashreqbank, Gulf International Bank and ABN Amro.
PWC said there was no conflict of interest. "The work we have done for Damas - does not in any way conflict with the forensic work we have undertaken," it said. Damas declined to comment. * additional reporting by Armina Ligaya @Email:firstname.lastname@example.org