By: Mahmoud Gamal
Dubai – Mubasher: Recent talks and speculations regarding UAE-listed companies’ losses and subsequent restructure plans have taken centre stage, particularly as some companies have neared bankruptcy and have begun affecting other companies on the bourse.
Two UAE real estate companies recently announced capital restructure schemes after their accumulated losses surpassed AED 1 billion and exceeded 50% of their capital.
The two most notable companies suffering massive losses over the past couple of years are Arabtec Holding and Drake and Scull International (DSI).
Arabtec’s losses exceeded AED 4.6 billion ($1.25 billion), representing 101% of capital, while DSI’s reached AED 1.7 billion ($460 million), representing 75% of capital, according to data compiled by Mubasher.
Arabtec recently announced a "rescue" plan that involves a capital increase, followed by a reduction to trim losses. Subscription in the Dubai-listed contractor’s capital top-up amounting to AED 1.5 billion began earlier on Monday, and is scheduled to end on 28 May.
The capital hike involves raising capital to AED 6.115 billion from its current AED 4.615 billion.
Earlier this month, DSI shareholders approved the decision for a capital restructure and the entrance of a strategic partner.
Restructure Schemes
Arabtec’s and DSI’s restructure schemes are the last hope for these two companies after almost two years of losses, Jamal Ajaj, director of Al Sharhan Shares Centre in Abu Dhabi, told Mubasher.
“There are no alternatives for the two companies,” he added in a comment, noting that raising capital after losses surpassed the current capital is like establishing a new company capable of completing the development of current and future projects.
Management Changes
Wadah Al Taha, board member at the Chartered Institute for Securities and Investments (CISI), told Mubasher that he expects Arabtec’s restructure to succeed if its management changes the way it deals with disclosures and investors.
Arabtec’s management has to keep its investors up-to-date at all times, he indicated.
The contractor’s success is bound by its ability to reduce its costs, which have been a major factor for over eight successive years, Al Taha stated, noting that the company’s current management needs to go over its general and administrative expenses, which have risen significantly in the past few years, as well as review investments in subsidiaries.
Translated by: Nada Adel Sobhi
