DSI moves closer to Saudi project debt deal

Dubai-based contractor DSI, which has worked on some of the emirate’s largest construction projects, is in the process of restructuring its debts. (Reuters)
Updated 09 January 2018

DSI moves closer to Saudi project debt deal

LONDON: Drake & Scull International aims to complete the 1 billion dirhams ($272 million) refinancing of its Saudi project debt within three months.

The Dubai-based contractor said on Monday that it had completed the restructuring of its corporate general bank debt in the UAE and has secured new credit lines and working capital facilities for its projects. Now the focus will turn to Saudi Arabia.

The contractor hit payment problems after a period of rampant acquisition-driven expansion, especially in Saudi Arabia where the construction sector suffered from the 2014 collapse of the oil price.

Back at home in the UAE, DSI said it had secured the support of all of its creditors after reaching an agreement with nine regional banks to refinance about 566 million dirhams of corporate debt.

That represents more than half of its total corporate general debt which stood at 1.07 billion dirhams at the end of the third quarter last year, the contractor said in a stock exchange filing on Monday.

The tenor and the maturity of the restructured debt have been “extended and re-termed on average for 3 years,” DSI said. 

At the same time, the company secured new credit lines with the banks to help deliver ongoing projects in the UAE.

DSI said that the remainder of its general debt, comprising a 440 million dirhams sukuk will mature in November 2019. 

It aims to begin talks with those sukuk holders in the second half of the fiscal year.

The contractor said it had total bank debt of 2.92 billion dirhams at the end of September 2017 – about two thirds of which is project debt.

“Our main objective is to drive a consensual restructuring plan with all our creditors across the region to rebalance our capital structure to be more efficient and conducive for our business plan and future prospects,” said Rabih Abou Diwan, investor relations director at DSI.

“The completion of our debt restructuring in the UAE will enable us to accelerate projects performance and delivery in Dubai and Abu Dhabi.

In August DSI ended a near three-year major order drought in Saudi Arabia when it was picked to help build a wastewater plant that will also generate biogas in the Eastern Province.

Saudi Arabia is emerging from a severe slowdown in the construction sector with builders expected to emerge as beneficiaries of increased government infrastructure spending in 2018.

Last month the Kingdom’s announced a record budget — with infrastructure spending surging more than 90 percent.

The budget represented a dramatic turnaround for a sector that has been hit by massive losses and job cuts as the collapse of the oil price brought some big projects to a halt and major contractors to the brink of insolvency.

Al-Rajhi Capital Research said in a note that sectors including cement, real estate, construction and building materials would stand to benefit from any increase in capital spending.

Oil prices near 2019 highs after US ends all Iran sanction exemptions

Updated 32 min 3 sec ago

Oil prices near 2019 highs after US ends all Iran sanction exemptions

  • Iran’s main oil buyers initially received sanction exemptions
  • US reiterates its goal to cut Iran oil exports to zero

SINGAPORE: Oil prices were near 2019 highs on Tuesday after Washington announced all Iran sanction waivers would end by May, pressuring importers to stop buying from Tehran.
Brent crude futures were at $74.40 per barrel at 0239 GMT, up 0.5 percent from their last close and not far off a 2019 peak of $74.52 reached on Monday.
US West Texas Intermediate (WTI) crude futures hit their highest level since October 2018 at $65.95 per barrel before edging back to $65.89 by 0239 GMT, which was still up 0.5 percent from their last settlement.
The United States on Monday demanded that buyers of Iranian oil stop purchases by May 1 or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers, most of them in Asia, to continue importing limited volumes.
Before the reimposition of sanctions last year, Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries (OPEC) at almost 3 million barrels per day (bpd), but April exports have shrunk well below 1 million bpd, according to ship tracking and analyst data in Refinitiv.
Barclay’s bank said in a note following the announcement that the decision took many market participants by surprise and that the move would “lead to a significant tightening of oil markets.”
The British bank added that Washington’s target to cut Iran oil exports to zero posed a “material upside risk to our current $70 per barrel average price forecast for Brent this year, compared with the year-to-date average of $65 per barrel.”
ANZ bank said in a note on Tuesday that “the decision is likely to worsen the ongoing supply woes being felt with Venezuelan sanctions, the OPEC supply cut, and intensifying conflict in Libya.”
The move to tighten Iran sanctions comes amid other sanctions Washington has placed on Venezuela’s oil exports and also as producer club OPEC has led supply cuts since the start of the year aimed at tightening global oil markets and propping up crude prices.
Ellen Wald, non-resident senior fellow at the Global Energy Center of the Atlantic Council, said the United States “seem to expect” Saudi Arabia and the United Arab Emirates to replace the Iranian oil, but she added “that this is not necessarily the way Saudi Arabia sees it.”
Saudi Arabia is the world’s biggest exporter of crude oil and OPEC’s de-facto leader. The group is set to meet in June to discuss its output policy.
“Should OPEC decide to end their supply cut program going into the second half of the year, this could limit oil’s upside in the coming months,” said Lukman Otunuga, analyst at futures brokerage FXTM.
Meanwhile, the Atlantic Council said the US move would hurt Iranian citizens.
“We’re going to see their currency collapse more, more unemployment, more inflation,” said Barbara Slavin, director for the Future of Iran Initiative at the Atlantic Council, adding that the US sanctions were “not going to bring Iran back to the (nuclear) negotiating table.”