x Abu Dhabi, UAEFriday 28 July 2017

'Preferential' rates for Damas in deal to repay Dh3bn debt

Damas, the region's biggest gold and jewellery retailer, has agreed with its creditors on a "preferential" interest rate to repay as much as Dh3 billion (US$817 million) of debt.

Damas, the region's biggest gold and jewellery retailer, has agreed with its creditors on a "preferential" interest rate to repay as much as Dh3 billion (US$817 million) of debt. Anan Fakhreddin, the newly appointed chief executive at the Dubai-based company, said the debt restructuring deal with more than 20 lenders had been completed in principle but would be finalised over the next two months.

He would not disclose the interest rate before the agreement was signed but said it was better than rates agreed to in other restructuring deals in the region. "The banks believe in our business to the extent that we got from them excellent support and preferential rates," Mr Fakhreddin said. This comes after the publicly listed company signed a standstill agreement in March with the majority of its bank lenders on a portion of its debt, a deal that enabled the company to restructure and stay in business.

Before that, the jeweller had an informal standstill in place since November on repayments of principal on its loans. While the underlying retail business of Damas was profitable, with gross income of Dh320m in the six months to the end of September last year, some soured investments weighed heavily on the retailer's books and pushed the company into losses. The debt restructuring deal would go forward once the legal documents had been drafted and the lawyers attained approvals from local authorities and the financial regulator, Mr Fakhreddin said. The company has put in a request to extend the standstill until September to allow time for this process, he said.

Damas, which has more than 450 stores worldwide, is also in the midst of an operational restructuring since its chief executive and member of the founding family, Tawhid Abdullah, stepped down from his post last year. He resigned after disclosing unauthorised transactions worth about Dh606m. The irregularities included more than 50 transactions, mainly in property, and nearly two tonnes of gold borrowed from Damas.

The Dubai Financial Services Authority (DFSA) conducted an investigation and handed down record fines and sanctions against Damas, Tawhid Abdullah, and his brothers Tamjid and Tawfique, who also held managerial positions. The DFSA banned the brothers from holding executive positions at any company in the Dubai International Financial Centre for between five and 10 years. They were, however, permitted to hold consultative posts. The brothers have recently been appointed as senior advisers at Damas, where they are helping to recover receivables, but do not have decision-making powers.

The brothers have also signed an agreement with Damas to repay the Dh606m to the retailer in three instalments over 18 months. The company has since appointed a new board of directors and installed an audit committee to prevent a recurrence of the company's previous compliance oversights, Mr Fakhreddin said. @Email:aligaya@thenational.ae