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By Tom Arnold
DUBAI, June 18 (Reuters) - Dubai-based contractor Drake & Scull International (DSI) expects to complete a plan to reduce its capital by 75 percent by the end of the third quarter, deferring the process by one month, its chief executive said on Sunday.
The capital reduction is the first phase of a plan to revive DSI’s fortunes amid a slump in the Gulf’s construction market as governments have cut back on project spending as a result of the fall in oil prices.
Strategic investor Tabarak Investment has become DSI’s biggest shareholder after acquiring the shares of former chief executive Khaldoun Tabari, DSI confirmed last week. Tabarak’s stake stands at about 18 to 20 percent after the sale, Zawya, a Thomson Reuters service, reported on June 11, citing a source.
The second phase of DSI’s restructuring plan involves a 500 million dirham ($136 million) capital increase by Tabarak. DSI’s capital reduction plan was one of the conditions for investment by Tabarak.
The firm on Sunday didn’t reveal specific information on where the capital injection will be spent.
“The intention is to spend the money on projects where we can complete these projects and generate more cash and profit from those projects,” said Chief Executive Wael Allan.
He added that the company was closing in on three potential new contracts, including one in the waste water business and two opportunities within mechanical, electrical and plumbing.
DSI’s business had not been affected by Qatar’s diplomatic rift with some of its Gulf neighbours, although the company was not bidding for new business in that country, said acting Chief Financial Officer Feras Kalthoum.
Last year DSI won a 340 million riyal ($93 million) contract for Qatar Rail’s Doha Metro project.
Kalthoum said the company had not received any official guidance about doing business in Qatar.
Another part of the company’s plans include refinancing or restructuring a portion of its debt, with executives saying the initial focus was on around 1 billion dirhams of funded and unfunded corporate debt in the United Arab Emirates and Saudi Arabia.
The company was in the process of meeting with creditors with a view to unveiling a plan within the next 60 to 90 days to refinance or restructure its debt, Kalthoum said, adding that options under consideration included issuing a sukuk or raising a syndicated loan to cover a portion of the amount.
A plan on refinancing or restructuring its debt in Qatar would have to wait until the “dust settles” on the regional rift, he said.
$1 = 3.6728 UAE dirham $1 = 3.6600 Qatar riyals Reporting by Tom Arnold; Editing by Saeed Azhar and Susan Fenton