Dubai-listed Arabtec Holding , which reported accumulated losses of 4.6 billion dirhams ($1.25 billion) last year, is asking banks to waive terms on its debt, two banking sources with direct knowledge of the matter told Reuters.
The building company has been in talks with its main creditors over the past month to waive the right for banks to call in facilities extended to the business, said the sources, who declined to be identified because the matter had not been made public.
The waiver request comes as Arabtec seeks to ensure that the proceeds of a planned 1.5 billion dirham ($408.4 million) rights issue will go to the company rather than be used to settle its liabilities, one of the sources said, adding that Arabtec will no longer be in breach of debt covenants after the rights issue.
Loss-making Arabtec had said in its 2016 financial statement that it was "in breach of certain debt covenants".
Some of the banks have provisionally agreed to Arabtec's request to waive terms on its debt, the source said.
In a statement to Reuters on Monday, Arabtec said: "In line with the DFM’s (Dubai Financial Market) transparency regulations, any material corporate development will be disclosed to the market."
It did not elaborate further.
Arabtec has been grappling for more than two years with a depressed market for infrastructure projects in the Gulf, with its problems exacerbated by internal disagreements among shareholders and several senior management changes.
At the end of 2016 its total debt stood at 2.46 billion dirhams.
On Monday Arabtec confirmed a Reuters report that Peter Pollard had been appointed as group chief financial officer and will oversee the company's recapitalisation programme.
Arabtec is due to hold its shareholder meeting on Tuesday, when it will seek investor approval for the rights issue.