Damas, the region’s largest jewelry company, is poised to sign a formal standstill on some 4 billion dirhams ( about 1.08 billion U.S. dollars) worth of debt.
Damas is working towards an official debt freeze to defer its principal loan payments until May 31 but still accrue interest, The National quoted an unnamed source as saying.
An informal standstill on principal payments on its loans involving more than 20 banks has been in place since November last year, the newspaper said.
“The banks and the management are working together to restructure the debt because they believe the core business of the company continues to be sound,” the source said.
The Abdullah brothers, the company’s majority shareholders, have begun liquidating assets outside of Damas to pay the company back 165 million dollars used in “unauthorized transactions,” another source told The National.
The brothers are reported to be considering selling personal assets to raise funds, including the sale of their yacht, the paper said, adding that most of the investments made with Damas funds were in properties in Dubai, which are difficult to sell in the depressed market. Property prices have dropped as much as 50 percent from their peaks.
“The restructuring is well on its way and the family remains committed to repaying the company in full,” Damas said in an earlier statement.
In October last year, Damas posted a net loss of 714.8 million dirhams (about 194.6 million dollars) for the six month period ending Sept. 30, pinning the loss partly on provisions for inventory and receivables exposures.
The company said at the time that its ability to continue to meet debt repayments was dependent on reaching a restructuring agreement with lenders.
Damas CEO Tawhid Mohammed Taher Abdulla quit in October last year after he disclosed more than 165 million dollars in ” unauthorized transactions” relating to investments in real estate, health care and local companies.
The firm hired PricewaterhouseCoopers as its chief restructuring adviser after news of the unauthorized transactions. It subsequently reached an agreement with two executives and its former chief executive — three brothers — who pledged to repay the funds.
