Drake & Scull secures US 70m loan for acquisitions
Credit thaw continues as MEP firm boosts buy-up power across region
Drake & Scull International, the MEP contractor, has secured a US $70 million loan facility from BNP Paribas to finance its recent acquisitions.
The loan from the French bank’s corporate division will have a three-year maturity and will give a boost to the Dubai-listed company’s aggressive expansion across the Middle East with new service areas. Last year, DSI made four major purchases, including a 65% stake in Drake & Scull International Saudi, and the full acquisition of its MEP branches in Qatar and Kuwait.
It also established DSI Infrastructure Water & Power, a branch focused on the utilities sector, and Drake & Scull Construction, which is overseeing the civil contracting business outside the UAE.
Bank funding has been a scarce resource for project-based companies in the last two years as a property downturn saw many lenders shy from the sector. But corporate financing, as well as acquisition activity in construction and engineering, have both seen an upturn in the last few months.
Research by PricewaterhouseCoopers, the financial services firm, in the third quarter of 2010 found that 2010 likely would be likely to exceed the 2009 total in deal volume, and total year-to-date deal value topping the full-year 2010.
However, ongoing concerns about the strength of a global recovery means “many global buyers and sellers are taking a wait-and-see approach to deal making,” it found in ‘Q3 2010 global engineering & construction mergers and acquisitions analysis’.
Saleh Muradweij, executive director of GTCC, DSI’s civil contracting arm bought in 2007 to focus on the UAE, told CW in a recent interview that bank funding is “still rigid” worldwide and that a continuing thaw in credit lines to the construction industry needs to continue.
“They’ve been very rese4rved ont heir funding for the past two years ... but at the end of the day the bank business is to lend money, otherwise they will go out of business. So I think we’ll see some leniency in that.”
DSI shares closed up 1.88% on Thursday to AED 1.08.