Jeweller set to sign extension of bank standstill agreement

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Dubai: The jewellery retailer DamasDamas is securing an extension to its standstill agreement with banks on debts totalling Dh3 billion plus to the end of September. As per the terms of the original agreement, the deadline expired on June 30.

"A verbal agreement on the extension is already there and I hope to sign off on it in the coming days," said Anan Fakhr Al Deen, who recently took over as CEO of DamasDamas jewellers. "The extension will offer greater flexibility to renegotiate our payment terms with the banks.

"That's almost done, and by August we will be in a position to finalise the financial restructuring, start the repayments over a period of time and then close the books on our recent history."

Fakhr Al Deen however was categorical that the company did not need any short-term infusion of cash for working capital requirements. "If you look at our cash position for the coming six years, we are perfectly fine with the amount of working capital agreed upon with the banks," he said. "They have allowed us to retain it at existing levels, which is an indication of the confidence in the company and its operations."

DamasDamas

Dubai Financial Services AuthorityDubai Financial Services Authority

Fakhr Al Deen insists the company has now moved on from these setbacks. A new nine-member board has taken over the running of the company from April, and Fakhr Al Deen himself came on board as part of the wholesale changes.

"We have a very involved board which meets nearly every week, committees have been set up to oversee the various elements of the financial and operational restructuring and the terms of reference have been issued to the committees," the CEO said.

"We have now re-established an internal audit function, we have hired a compliance officer who comes from a regulator background, and re-established the risk assessment function within the company."

A new business plan is being framed and should be placed before the board in November. The business plan lays emphasis on DamasDamas consolidating its presence around being a jewellery retailer of choice in the Middle East and select overseas markets such as India.

"We are mapping the process for the new business plan, but the core of it is to be in a position to hit the market with new products at a much faster rate," said Fakhr Al Deen.

Abdullah brothers

The Abdullah brothers may have missed the first instalment on their repayments to DamasDamas, but that will not constitute a default, according to CEO Anan Fakhr Al Deen.

"This is as per the settlement agreement they signed with DamasDamas, so from a legal point of view, there is no violation," the CEO said. "The next instalment is due in the third quarter and the first payment will be clubbed along."

Last October revelations were made about DamasDamas funds being diverted to finance the original promoters' personal investments, mostly in real estate.

These are in the region of Dh600 million. The brothers own 52 per cent in the Nasdaq Dubai listed company.

"They have an obligation to us and have pledged their shares as collateral," said Fakhr Al Deen. "If we have to use these pledged shares, it automatically dilutes their stake."

But the brothers still have a role with the company as advisers. On whether in doing so the spirit of corporate governance was cast aside, Fakhr Al Deen said: "For an outsider it might look like that. But in the jewellery business, most of the deals that were done in the past were on the basis of a handshake. "I have been touring the markets and find that there are assets with external parties with not a single document to support them. Without bringing the same people the brothers who have the history, the influence and the details, plus the power to bargain, it would have been difficult to recover these."

By Manoj Nair Associate Editor

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