Dubai contractor DSI seeking outstanding payments from Saudi Aramco

Loss-making Dubai contractor Drake & Scull International said it expects to hear “very soon” from Saudi Aramco about settling nearly half of outstanding payments owed for its work on Riyadh’s King Abdullah Petroleum Studies and Research Centre.

Drake & Scull (DSI) has five claims outstanding with Aramco totalling SAR2.3bn and hopes to soon settle SAR1.05bn of them, DSI Group CEO Wael Allan told Reuters.

If the matter is not settled, Allan said DSI may consider all legal options including arbitration to recover the remaining amount for its work on the research centre (KAPSARC), which cost $543m to build and opened in 2016.

“All options are open,” he said in an interview. “We feel strongly that we are due some of these claims and we will pursue them to the end.”

DSI is struggling amid a depressed Gulf construction market as governments have reined in spending on infrastructure due to lower oil revenue. Allan said the company, which has put non-core assets up for sale and is seeking to reschedule debt repayments, cut its workforce by 7,000 over the past year to around 21,000.

Investors are fretting about its capital restructuring plans.

On Sunday, DSI’s shares slumped nearly 10 per cent after it said shareholders expressed no interest in a new share issue and had approved increasing writeoffs by up to Dhs722m, in addition to a previously planned capital reduction of Dhs992m, because of potentially unrecoverable receivables.

Allan said DSI’s total claims against companies, including Aramco, stood at around Dhs4bn in terms of claims and variations.

In the past three months the company has improved its collection of payments significantly.

“Some of the existing have had a cash injection in them which has enabled them to pay us and so actually in terms of Saudi we have stabilised the business reasonably well,” he said.

The issue of delayed payments in Saudi Arabia eased in the final months of 2016 as the government disbursed about SAR100bn ($27bn) in November and December, according to statements by officials and central bank data.

Tabarak Investment, a Dubai-based investment firm which currently does not hold any stock in DSI, agreed in February to a Dhs500m capital increase via a new share issue at Dhs1 per share if the securities regulator approved the further capital reduction by DSI.

The capital injection should be received by the middle of 2017, if the regulator’s approval comes through, said Allan.

DSI appointed PricewaterhouseCoopers (PwC) in December to assist with examining the company’s capital structure and financial liabilities and a five-year plan drafted with the help of PwC has been sent to creditor banks.

DSI is in the final stages of negotiating the sale of its Indian operations as part of plans to offload non-core assets.