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Abu Dhabi, UAEMonday 10 December 2018

Drake & Scull shares drop 22% in four-day sell-off 

Stocks plunge after proposals to raise capital through convertible debt or selling new shares to strategic investors were made public

The company, which has faced mounting losses since 2015, called the general assembly meeting in accordance with an article of UAE companies law. Rich-Joseph Facun / The National
The company, which has faced mounting losses since 2015, called the general assembly meeting in accordance with an article of UAE companies law. Rich-Joseph Facun / The National

Shares of the Drake & Scull International on Wednesday slumped more than 9.4 per cent as investors continued to sell the stock after shareholders' proposal to raise capital through a convertible debt or selling new shares to a strategic partner were made public.

DSI stocks ended trading at Dh1.35, its lowest level in more than a year. The shares, which on Tuesday closed 9.7 per cent lower, have lost value in all four trading sessions this week, pushing the weekly losses to more than 22 per cent. It was the biggest decliner on Dubai Financial Market, whose benchmark index DFM has retreated less than 2 per cent for the period.

DSI earlier this week said that its shareholders at the annual general meeting proposed increasing the company’s capital by Dh500 million through the issuance of new shares with a minimum value of Dh1.25 per share to a strategic partner with the condition of a one-year trading ban.

The second option proposed was to raise the capital by issuing convertible bonds with value not exceeding Dh1 billion, the company said in an April 23 bourse filing. DSI board is meeting on Thursday to discuss the proposals tabled at the AGM, it said in a regulatory filing.

“The news is out that a new investor [is] potentially coming in at Dh1.25 a share and the retail investors are getting panicked. They are reading it [the minimum sale value of Dh1.25] as the actual value of the company shares,” Nabil Rantisi, the managing director of capital markets at Daman Investments, said. “The market is too thin and there are no buyers and this is what is reflecting in the DSI shares as well.”

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Ziad Makhzoumi, the advisor to the DSI board, on Wednesday said that the company is considering the sale of a convertible sukuk as a way of raising the company’s capital, in a CNBC Arabia interview.

DSI, which counts Saudi Araba as its core markets, aims to finish a Makkah project by the end of this year and will focus on getting more jobs in the energy sector, he said.

Mr Makhzoumi could not be reached for comment by The National.

DSI in the last week of March said it plans to issue a sukuk convertible into equity with a minimum value of Dh450m.

The Dubai-based contractor last month also appointed Fadi Feghali as its chief executive to fill the post that has remained vacant since August last year. The company in January said it expects to finalise restructuring of approximately Dh1bn of debt it raised for projects in Saudi Arabia by March-end. It has yet to conclude the deal, a company spokesman said on Wednesday.

DSI will begin negotiations with bondholders in the UAE to refinance Dh440m worth of sukuk in the second half of 2018. The Dubai contractor, which was hit hard by a slowdown in the Arabian Gulf economies, has already reached an agreement with a group of nine lenders to refinance Dh566m of corporate debt.

DSI said in February that its full-year net loss widened despite posting a profit in the fourth quarter of 2017.