Further delay for Damas deal

The Middle East's largest jeweller has extended a deadline to agree a creditor repayment plan by another month.

A Dh1.8 billion debt agreement involving Damas International and three former executives has again been delayed.

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A proposed date for an agreement to ensure the Abdullah brothers, who formerly ran the Middle East's largest jeweller, repay the amount to a group of lenders and the company has been put back to allow one bank to accept the terms.

The agreement was to be signed by the end of last week, but this has been extended to the end of this month, Damas said.

Damas is owed Dh614 million (US$167.1m) by the Abdullah brothers Tawfique, Tawhid and Tamjid, members of the company's founding family, who previously ran it. The three withdrew cash and gold from Damas without shareholder approval.

Through their privately held companies Damas Real Estate, Damas Investments and Damas Hotels the brothers owe a further Dh1.2bn to lenders.

The so-called cascade agreement has been delayed a number of times due to the complex nature of negotiations that include guarantees, varying ownership structures and a mix of secured and unsecured debt arrangements.

The repayment agreement is expected to last three years to increase the value of any Abdullah assets should market conditions improve.

The brothers were the subjects of the strictest regulatory action in the history of the Dubai International Financial Centre (DIFC) in March last year for improperly withdrawing Dh365m of cash and nearly two tonnes of gold worth Dh250m from Damas without shareholder approval.

A signed repayment deal is critical for Damas to proceed with a Dh3bn debt restructuring recently agreed to with its own banks.

This will be used for working capital and loans for investment in expansion, which will focus on the jeweller's business in Saudi Arabia and the UAE.

Damas recently acquired 49 per cent of the share capital of its joint venture operation in Saudi Arabia, Damas Saudi Arabia Company, doubling its stake and taking full control.

The company's chairman, Ibrahim Belselah, recently said Damas was considering pulling out of India, the world's biggest gold market.

In many countries across the Middle East, North Africa and Asia, the company is also trying to recover hundreds of millions of dirhams of investments, loans and payments for merchandise the three brothers made without proper documentation.

They routinely sealed deals with handshakes or verbal agreements, rather than formal contracts.

The unofficial nature of the deals the trio made is the reason Damas has had to appoint them as advisers to the company because, without their knowledge and contacts, it would be difficult to recover all of the loans.

About 80 per cent of the brothers' creditors are the same as the creditors of the company.

Damas's debt restructuring comprises loans worth Dh1.1bn and a working capital agreement worth Dh1.9bn.