Abu Dhabi, UAEMonday 10 August 2020

Dana Gas chief pleads restructuring case to sukuk holders

The Sharjah-based operator's chief executive made a plea to sukukholders to talk terms on refinancing $700m sukuk

The chief executive of Dana Gas, Patrick Allman-Ward, yesterday made a direct plea to holders of its US$700 million sukuk to hold talks over new financing terms.

In a scheduled open phone call, Mr Allman-Ward set out to explain why the Sharjah-based company had its own sukuk declared non-compliant with Sharia law earlier this year, why it felt that new, less attractive terms were justified and why Dana Gas was in a much better position now - at least in terms of its potential assets value - than when the company was forced to restructure its Sharia bond financing five years ago under the duress of a default declaration.

His plea follows months of acrimony between the company and representatives of the sukukholders, who have accused Dana Gas of having the sukuk declared non-compliant with Sharia as a ploy to avoid another declaration of default.

The two outstanding sukuk – each for $350m – are due in October and the company does not have enough cash on hand to meet its obligations, according to the company.

Mr Allman-Ward said he still would want to meet with the ad hoc committee - represented by investment bank Moelis & Co and law firm Weil, Gotshal & Manges - though he noted they have refused all previous invitations, including one made before, Dana Gas secured a ruling from a Sharjah court that particular terms of its two outstanding sukuk were not Sharia-compliant. Dana Gas has won court injuctions in three jurisdictions: Sharjah, the British Virgin Isles, which is the domicile of the company holding its Egypt assets, and England, which is the legal jurisdiction that covers the main terms of the sukuk.

"This is obviously not a traditional restructuring," Mr Allman-Ward said, outlining the "high level" terms Dana Gas is proposing to sukukholders over the phone, which included a new four-year term with the possibility of early payment and a structure that would be up-to-date with the latest sukuk legal thinking.

Four years ago, when sukukholders had declared technical default, the company had agreed to pay 9 per cent annual interest on one tranche and 7 per cent on another, with the latter backed by its holdings in Egypt and exchangeable into Dana Gas shares.

The new "terms need to be brought into line with the existing sukuk market and brought into line with [the] enormous [potential] value of [the company's] assets," which Mr Allman-Ward put at as much as $29 billion, based largely on the awards Dana Gas has won in international arbitration bodies in London and The Hague against the governments of the Kurdish region in Iraq and Iran in terms of contract disputes it has with each.

Though he did not specify an interest level - or profit share under the Sharia structure - he said current market conditions would indicate a yield below 4 per cent. He also said that they would not have an exchangeable element as traders in the previous structure had arbitraged and dumped the shares, depressing the shares in a manner that is unfair to existing shareholders.

Dana Gas has already begun to recover some of the actual award damages from the Kurdish government and will hear from the court later this year on punitive damages. However, these disputes usually are settled by negotiations between the parties as recovery can be a long and onerous procedure.

Meanwhile, Dana Gas is still having trouble getting its arrears with the Kurdish and Egyptian governments paid, which has led to the current cash crisis. Despite intermittent progress, it is still owed a total of $900m in arrears from the two governments.

The sukukholders' representatives were not immediately available for comment.

Previously, Andrew Wilkinson, a lawyer at Weil Gotshal & Manges said Dana Gas' tactics are "a blatant attempt to bully the certificate holders.”

The sukuk are owned primarily by funds managers, the largest of which is Blackrock Advisors.

Dana Gas has 200,000 shareholders, with 19 per cent of the company owned by Crescent Petroleum, also based in Sharjah.

Updated: July 6, 2017 07:18 PM



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