IslamicFinance.de

UAE energy producer Dana Gas announced that a large majority of holders of its outstanding $700 million sukuk had consented to a proposed restructuring of the notes. The company, which last year refused to repay creditors, reached last month a restructuring agreement after a long and complex legal battle. Following the launch of a tender and exchange offer on May 22, 93.69% of the holders approved the terms of the proposed restructuring, exceeding the minimum required 75% approval threshold.

Dana Gas has reached agreement with creditors on restructuring $700m of sukuk. Under the deal with the sukuk holders’ committee, investors who want to exit the instruments can do so in a tender at 90.5 cents on the dollar. Alternatively, investors can exchange the sukuk for new three-year Islamic instruments with a 4% profit rate, while receiving final profit payments that they were owed before the old sukuk matured last October 31. Holders representing more than 52% of $350m of sukuk convertible into equity, and 30% of $350m of non-convertible sukuk, agreed to take no further action before the tender. The deal would require the support of 75% of sukuk holders and would then become compulsory for the rest. Dana’s shares jumped 3.9% on Sunday after news of the deal.

Dana Gas reported a net profit of $14 million for the first quarter of 2018 compared to $11 million reported during the same period last year. The company attributed the increase in net profit to better realised prices and the positive arbitration settlement with the Kurdistan Regional Government (KRG). First quarter gross revenue reached $120 million compared to $118 million in the first quarter of 2017. During the first quarter of this year, group average production was 65,000 barrels of oil equivalent per day (boepd), down 7% from 69,900 boepd in the first quarter of 2017. Dr. Patrick Allman-Ward, CEO of Dana Gas, said the first quarter 2018 saw Dana Gas continue to perform solidly from both a financial and operational perspective. The company recorded a 27% increase in net profit and higher revenues reflecting higher realised prices.

Dana Gas has reached an agreement with key holders of $700m of its sukuk to restructure the securities. A committee representing sukukholders agreed to accept an immediate cash payout of 20 cents to the dollar and to roll the rest into a three-year security. According to the agreement, the new security will pay an annual coupon of 4%, bondholders agreed to remove the convertible option in the securities. Dana Gas said it would pay a further 20% of the sukuk after two years and will raise the coupon to 6% if it fails to do so. The majority of sukukholders have agreed to the terms. Investment bank Houlihan Lokey is advising Dana Gas and Moelis & Co is the consultant to the committee of sukukholders.

United Arab Emirates energy firm Dana Gas received a new injunction from the English High Court restricting its ability to pay dividends or increase its debt. Sukuk holders have been trying to force the company to redeem the sukuk since last year. Dana said in late March that it would seek shareholder approval on April 11 to pay a cash dividend for 2017. The dividend would be worth 5% of capital or about 349 million dirhams (67.4 million pounds). But the English High Court order blocked Dana from making dividend payments unless it also sets aside money to redeem the sukuk. It also prohibited Dana from increasing its debt by more than $25 million.

Dana Gas plans to pay a dividend for 2017 despite its legal dispute with investors demanding that the company settles $700 million of sukuk bonds. International funds and local investors want Dana to direct its resources towards repaying that debt. Dana last year halted payments on its sukuk, saying the bond had become unlawful in the United Arab Emirates because of changes in Islamic finance. Dana has been in talks for months with creditors to restructure its sukuk. One of the proposals envisaged Dana redeeming 10% with cash and rolling over 90% under new terms. However, creditors want the company to redeem a higher proportion of the sukuk.

The Dana Gas sukuk case illustrates the dangers of local country courts favouring domestic companies. Wherever possible, international investors should avoid local law. The most commonly used is English law, even for commercial arrangements that have nothing to do with the UK, because English law is well-developed and English courts have a deserved reputation for legal competence and impartiality. Dana Gas raised money from international investors by issuing sukuk. The money so raised was invested in a mudarabah agreement with Dana Gas, written under UAE law. Dana Gas also entered into a purchase undertaking, written under English law. Under UAE law, sukuk investors would have been sunk, having to litigate about whether the commercial arrangements were or were not Shariah compliant. However, they were saved by the purchase undertaking being under English law.

United Arab Emirates energy producer Dana Gas swung to a net profit of $83 million in 2017 after a $1 billion payment as part of a settlement with the Kurdistan Regional Government (KRG). However, Dana posted a net loss of $42 million in the fourth quarter of last year. Profits in the fourth quarter were affected by an impairment charge of $34 million against the Zora gas field in the United Arab Emirates. Dana, which has struggled to collect receivables from Kurdistan and Egypt over the past four years, collected $466 million from the KRG and $164 million from Egypt last year. Dana’s cash balance at the end of 2017 amounted to $608 million, more than double the $302 million it had at the end of 2016. Dana Gas is at the centre of a legal dispute with the holders of a $700 million sukuk that the company refused to redeem on the grounds that the notes were no longer sharia-compliant. Legal proceedings in English and UAE courts are continuing.

A London High Court judge again ruled in favour of creditors in a dispute over whether Dana Gas must repay $700mln sukuk. Judge George Leggatt rejected an attempt by the company to overturn his decision last November that the purchase undertaking behind the sukuk was valid and enforceable. There was no immediate comment from Dana.

Talks to resolve a dispute between Dana Gas and its sukuk holders broke down after the company proposed a 15% cut on some of the debt. The United Arab Emirates-based energy company suggested buying back about $200 million at 85 cents to the dollar, and rolling over the rest into new securities with a profit rate of 4%. In June, Dana Gas announced it no longer considers its sukuk compliant with Shariah standards. It has since missed profit payments in July and didn’t repay two $350 million mudarabah bonds due Oct. 31. Dana applied to set aside a Nov. 17 judgment that went against it because the company couldn’t participate in the trial. If its application is unsuccessful, Dana Gas will appeal against the judgment. If the appeal is successful, the issue will be reheard by the English High Court over a three-day period from Jan. 30.

Weeks of talks between UAE energy firm Dana Gas and some local holders of a disputed $700 million sukuk have failed to reach an agreement. Last year, Dana refused to redeem $700 million of maturing Islamic bonds, arguing they were no longer valid under United Arab Emirates (UAE) law because of changes in Islamic financial practice. The move shocked the global Islamic finance industry, as some investors worried it could set a precedent for other sukuk issuers. Dana proposed to swap its sukuk, but creditors rejected the proposal, saying the terms were unfavorable. The case moved to UAE and British courts. Legal proceedings in both countries are continuing, but in November a British court ruled in favor of Dana’s creditors.

Dana Gas stocks rose by 13.2% on Christmas Day 2017, to complete a buoyant six months for the stock. This may be due to the company's arbitration victory against the regional government of Iraqi Kurdistan, over $2bn it and its consortium partners are owed in overdue payments. It also hints at shareholders’ belief that Dana will not be forced soon to satisfy its own creditors. The firm refused to honour its $700m sukuk bond claiming that it no longer complied with sharia law, therefore was 'unlawful' in the United Arab Emirates (UAE). In November a British court ruled that the company had to pay. The judges said that, because the bond was issued under English law, it had to be viewed on its merits under that law alone. The risk of non-compliance in the UAE, they argued, must fall squarely on Dana. The Islamic-finance industry cheered this ruling. However, to get hold of Dana’s domestic assets, creditors need a new ruling from the UAE courts. The Dana saga is a reminder not just that Islamic finance still lacks shared standards, but also that court judgments help creditors only when they are enforceable.

The English Court of Appeal has refused Dana Gas' appeal against fund manager BlackRock to participate in English court proceedings. Dana is refusing to redeem its $700 million outstanding sukuk on the grounds that they are no longer sharia-compliant and therefore unlawful in the United Arab Emirates. Courts in both Britain and the UAE are hearing the case. On November 17 the English High Court ruled in favour of the sukuk holders. Dana plans to set aside this judgement on the grounds that the company was not permitted to represent itself in court. Regardless of the result of that application, additional legal proceedings in England are expected.

Sukuk issuers are changing the language in documentation for new issues to reassure investors after Dana Gas refused to redeem $700 million of maturing sukuk. Dana Gas said it would not repay sukuk maturing in October because changes in the interpretation of Islamic finance had made the bonds unlawful in the UAE. Issuers are now amending their documentation to preclude the use of this argument. According to Mohamed Damak, global head of Islamic finance at Standard & Poor's, clauses seeking to reduce sharia compliance risk have become normal in the global industry, but the complexity of sukuk makes it difficult to remove the risk entirely. According to Mohammed Khnifer, senior associate at the Islamic Development Bank, sukuk holders and issuers will now rely more on English law and avoid local laws with dollar-denominated issuance.

Dana Gas announced it will appeal against a British court’s ruling on its $700 million sukuk, after a UAE court lifted an injunction preventing it from participating in the British proceedings. Dana previously said the sukuk was invalid under UAE law and refused to repay holders of the sukuk which matured at the end of October. The energy producer sought a declaration on the sukuk’s lawfulness at courts in the UAE and Britain. Last month, a British court ruled in favour of Dana creditors, deciding the purchase undertaking was valid and enforceable. Dana has said it aimed to appeal against the ruling because it could not take part in proceedings. A hearing in Sharjah on the validity of the sukuk under UAE law is scheduled for Dec. 25.

Dana Gas plans to appeal the UK court ruling on $700mn of its outstanding sukuk. According to Dana Gas, the decision by the London court is flawed because the UAE-based company was barred from participating in the proceedings due to an injunction at home. Judge George Leggatt said the English law contracts are enforceable in the case. Dana was challenging a provision called purchase undertaking, which allowed the trustee on behalf of investors to force Dana to buy them out of the agreement at par. Dana shares fell as much as 5.6% on the Abu Dhabi stock market on Sunday. The court ruling puts investors one step closer to resolving a dispute over the sukuk that highlighted one of the Islamic finance industry’s weak spots.

A High Court judge in London ruled in favour of creditors in a case regarding the validity of the purchase undertaking for about $700 million of sukuk issued by Dana Gas. The idea that Dana Gas has been able to assert for the past five months that its own sukuk were non-sharia-compliant has struck many observers as unusual. Judge George Leggatt said that Dana Gas' challenges to the validity and enforceability of the purchase undertaking were unfounded and declared the purchase undertaking for Dana's sukuk as valid and enforceable.

Dana Gas share prices fell 4.17% following Friday’s English High Court ruling against Dana Gas and in favour of bondholders. Danas said it plans to appeal the decision by the London court that declared the company’s $700 million sukuk valid and enforceable. Friday’s ruling was made in Dana Gas’s absence from the court. Dana Gas had earlier refused to repay debt owed to investors for two mudaraba sukuk worth $350 million each. The latest ruling does not mean that Dana Gas has to pay bondholders just yet, with another hearing in a UAE court scheduled for December 25.

An English High Court judge has ruled in favour of Dana Gas’s bondholders, reported the Financial Times.

More details at the source.

Dana Gas reported a steep rise in third-quarter profit, benefiting from a $1 billion payment as part of a settlement agreement with the Kurdistan Regional Government (KRG). The agreement boosted Dana’s third-quarter earnings and net profit for the nine-month period ending on September 30, which amounted to $125 million against $26 million during the same period one year earlier. The settlement led to a reversal of the provision for payments to the KRG, with the balance of unpaid receivables booked to new petroleum costs. The company is at the centre of a legal dispute after having refused to redeem $700 million in outstanding Islamic bonds claiming they are no longer sharia compliant. It has started legal actions in UK and UAE courts to avoid redeeming the sukuk. Dana claimed being confident pursuant to independent legal advice of prevailing in its interpretation of the outcome.