#Dana #Gas takes offer to #creditors off the table in $700m #sukuk row

Dana Gas has withdrawn an offer to creditors to exchange its debt of $ 700 million Islamic bond for new notes. Thereby ending the chance of a consensual resolution to a case that could shape the future of the global Islamic finance industry. The gas company is refusing to repay holders of its Islamic bond which matures in October. It said last month it had received legal advice that the bond was no longer Sharia-compliant in the UAE because of changes in Islamic finance interpretations over the recent years, and was therefore not lawful. But creditors say Dana has to pay them back and argue if the sukuk was legal when the deal was struck, it holds, and if it was illegal then it would mean the company is in default.

The dispute which probably will be decided in the courts is being closely watched by investors and banks across the Islamic finance industry. It is possible that it could set a precedent for other sukuk issuers to refuse to redeem their paper on the grounds that it is no longer Shariah-compliant. The court case is being disputed in Britain and the UAE because the purchase undertaking for the sukuk is governed by English law, while the gas production assets behind the sukuk fall under UAE law.