Auditors sound the alarm over Gulf General Investment Company as its string of losses continue.
Alarm raised over fourth straight quarterly loss for GGICO
Gulf General Investment Company (GGICO) has recorded its fourth consecutive quarterly loss, prompting its auditors to warn about the urgency of adopting a debt-rescheduling plan.
Auditors pointed to significant difficulties for GGICO, a conglomerate listed in Dubai with interests in property and manufacturing.
The company swung to a loss of Dh146 million (US$39.7m) for the third quarter, down from a profit of Dh48.8m during the same period last year.
A six-year property boom and rapidly rising stock markets encouraged many Gulf investment groups to invest heavily in off-plan property developments that have since soured. Now many of them have been forced to restructure their debts with creditors at a time when banks are under pressure to contain lending and limit their risk exposure. GGICO reported losses on investments totalling Dh59.8m and write-downs of Dh33.9m on payments due from customers.
But the company's ability to do business may hinge upon its ability to negotiate a way out of its debt problems, accountants from Deloitte wrote in their audit report.
"The ability of the group to continue as a going concern is dependent on rescheduling the terms of obligations with the lenders … continued support from shareholders and future profitability, which is dependent on adoption and implementation of a restructuring plan currently in discussions," the report said.
GGICO's shares have fallen 56.5 per cent since the start of the year to 22.4 fils each.
At the end of September, the company had defaulted on Dh568m of bank loans. It has appointed HSBC Middle East to oversee its restructuring efforts.
"The company's restructuring of the debt due to the banks is in advanced progress and [is in the] documentation stage," said the company. GGICO could not be reached for comment on the auditors' report.
The auditors also warned that GGICO had not put aside funds to cover any losses from "doubtful debts" arising from Dh494m of receivables from sales of development properties. The debts were unlikely to be recovered because of "the nature of records maintained", the auditors wrote. Fitch Ratings withdrew its ratings on GGICO in 2009. Moody's Investors Service also withdrew its coverage in March.
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