Dana Gas’ plan to swap ‘unlawful’ $700 million sukuk irks creditors

Dana Gas’ plan to swap ‘unlawful’ $700 million sukuk irks creditors

June 14, 2017
Dana Gas
Dana Gas

Fatma Al Dubais

DUBAI — Abu Dhabi-listed Dana Gas has proposed swapping $700 million of outstanding Islamic bonds because it had discovered they were “unlawful”, prompting an outcry from some creditors.

The price of Dana’s sukuk plunged after Dana’s proposal on Tuesday, with one creditor in Dubai describing it as “very investor unfriendly” and another saying it made no sense as the bond had been judged sharia-compliant when it was issued.

Dana’s 9 percent bonds were offered at 87 cents on the dollar, down from 91-92 cents previously, while shares in the company closed 15 percent higher.

The Dubai-based portfolio manager said Dana would have trouble tapping the debt market again if it unilaterally declared its paper illegal and said he had already contacted the company’s investor relations office to express his strong disapproval of the proposal. Dana, which had a cash balance of $298 million in March, originally announced its intention to hold discussions with sukuk holders in early May.

Dana said at that time it needed to focus on “medium-term cash
preservation” because of difficulty getting payments from production assets in Egypt and Iraq. The existing sukuk, half of which are exchangeable into equity, will mature this October. Dana said it had received legal advice that the paper was not sharia-compliant and was therefore unlawful in the United Arab Emirates. Dana said, it was proposing to creditors that they swap it for new Shariah-compliant instruments with four-year maturities and profit distributions at less than half the rate of the existing instruments. The new paper would not feature any conversion into equity. — Reuters


June 14, 2017
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