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Sun 28 Mar 2010 01:41 PM

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Damas signs standstill agreement with creditors

Retailer had $885m in liabilities at end of September, according to financial statement.

Damas signs standstill agreement with creditors
DIFFICULT TIMES: Dubais regulator ordered the jeweller to dismiss its board and pay penalties after an enquiry found irregularities.

Damas International reached a “standstill” accord with most of its creditors to defer payments as the jewelry retailer seeks to restructure its business after it was fined by the market regulator for unauthorized deals.

“A restructuring plan is currently being developed by the company, which will be implemented at the end of the standstill period,” the Dubai-based company said in an e-mailed statement today. Damas didn’t give details of its lenders or the amount involved in the standstill agreement.

The retailer had AED3.25bn ($885m) in liabilities at the end of September, according to its financial statement on the Nasdaq Dubai bourse Web site. The company posted a six-month loss of AED714.8m for the period ended September 30 after reporting a profit of AED91.1m in the year-earlier period.

Damas is among several Gulf Arab companies seeking debt renegotiations after the economic crisis dried up financing and brought the property boom to a halt. Dubai World, a state-owned holding company, is asking creditors to wait as long as eight years before they receive all their money back as part of its $23.5bn debt reorganization announced last week.

Damas was fined AED2.57m on March 21 by the Dubai Financial Services Authority for failing to prevent its owners, the Abdullah brothers, withdrawing about AED365m from the company without board approval. The brothers also owe the company a value equal to about 1.9 tonnes of gold. The board resigned following the directive by the regulator.

The shares have dropped 31 percent this year and were at 15.5 cents when they last traded on March 25. Damas raised $270.6m in an initial share sale in July 2008 before listing on Nasdaq Dubai. The shares were sold at $1 each.

Damas, which has jewelry stores in almost 20 countries, said in October that Chief Executive Officer Tawhid Abdulla resigned because of unauthorized transactions. Later that month, Damas said Abdullah and his two brothers agreed to repay the full value of the unauthorized deals of about $165m.

The company last month appointed Chief Financial Officer Sanjay Kalsi as interim acting chief executive as part of management changes. Sanjay Manchanda, a partner at PricewaterhouseCoopers, was appointed chief restructuring adviser. A shareholders meeting will be held on April 19 to appoint new board members, the company said in a separate statement to Nasdaq Dubai today.

Standstill is an interim agreement between a borrower and its creditors that defers principal repayments of debt, pending agreement on debt rescheduling.

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