Board in talks with lenders on debt restructuring
DUBAI: The constantly growing accumulated losses of the Dubai Financial Market (DFM)-listed Gulf General Investment Company (GGICO) have almost washed out its capital as of June end, 2020.
While the share capital of the real estate-to-insurance company is AED1.791 billion as of June 30, 2020, the accumulated losses at AED1.717 billion have already eaten into 95.81 per cent of the share capital.
The management of the debt-ridden company said the board of directors is currently in the process of holding negotiations with creditors to find ways to settle the issue of gaping debt the company has been grappling with.
In the meantime, the auditors of the company have qualified the accounts of the company for the first half. The auditors have noted that during the 6-month-period ending June 30, 2020, the interest accrued on borrowings of the group aggregating to an amount of AED67.5 million has been excluded from the accounts.
“This interest cost has not been recorded in the condensed consolidated interim financial statements since January 1, 2020. Had this interest been provided for in the condensed consolidated interim financial statements for the period, the GGICO’s finance costs and loss for the period would have increased by AED67.5 million,” the auditors noted while explaining the basis to quality the account.
But for the exclusion of this interest cost, the accumulated losses, net current liabilities and total liabilities of the group would have increased by AED67.5 million.
And this has helped the company report a net profit of AED32.637 million for the period under review against a loss of AED29.798 million for the same period last year.
Total assets as on June 30, were to the tune of AED5.073 billion as against AED4.930 billion six months earlier.
Large short term debt staring at company
The group has third party commitments amounting to AED4.281 billion as of June 30, 2020 of which AED4.254 billion is payable within one year from the reporting date
The board of directors believes that the group will meet its funding requirements through future income generated from operations, sale of investments and properties, existing cash and bank balance and restructuring of its certain existing loan facilities
“Furthermore the board of directors and the management have undertaken a variety of initiatives and are continuing with the plans, which they believe to be realistic and achievable to ensure the Group’s ability to meet its financial commitments as they fall due,” the company said.
Following a restructuring exercise in 2012, the company embarked on another one during 2017, whereby GGICO initiated a negotiation with the lenders to further restructure its outstanding debt.
As of September 30, 2017, the company concluded the revised restructuring agreement after obtaining approvals from the majority of the banks covering a total debt of AED2.147 billion including interest.
Under the revised agreement, 66.08 per cent of the earlier restructured loan is repayable in annual instalments until December 31, 2023 and the remaining 33.92 per cent as a final settlement in a manner to be renegotiated at that time.
Curiously, of the total restructured loan, the repayment of AED157.4 million (principal) due and payable as on June 30, 2020 was defaulted by the company.