Dana Gas, the Sharjah-based energy company embroiled in court battles over the legality of its US$700 million sukuk, said on Monday the English court of appeal rejected the company's application to appeal an order that allowed its creditor Blackrock to join in the English court proceedings.
The Abu Dhabi-listed company declared in June that its sukuk, which it was seeking to restructure, had become non Sharia-compliant following developments in Islamic finance, and that it was therefore not obliged to repay its debt to creditors, which matured in October. These creditors include New York-based BlackRock, the world's biggest asset manager.
London’s high court on November 17 ruled in favour of creditors, further complicating the legal case. Judge George Leggatt found that Dana Gas’s interpretation of legal documents was “untenable and flatly inconsistent.”
Dana Gas said last month it planned to challenge the London court ruling, enforcing the legality of the company’s sukuk, as the judgement issued was "flawed".
This is the second time that Dana Gas has sought to restructure Islamic bonds, following a deal with creditors in 2013 over a $1 billion sukuk that matured in October 2012. The company had faced cash flow issues due to outstanding payments from Egypt and the semi-autonomous Kurdish region of Iraq, where a large portion of its assets and production facilities are located.
Dana Gas said on Monday it is proceeding with an English high court application to set aside the November 17 ruling, on the grounds that the company was unable to represent itself in court because of a mandatory injunction from a court in Sharjah.
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Read more:
[ Dana Gas says Sharjah Court allows it to take part in UK legal proceedings ]
[ Dana Gas to appeal London ruling in $700 million sukuk case ]
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The emirate's Court of First Instance on September 17 issued an anti-suit injunction that prevented the oil and gas company from participating in the UK trial. But Dana Gas said earlier this month that the Sharjah Court of Appeal had lifted the anti-suit injunction.
If the application to set aside the November 17 ruling is unsuccessful, Dana Gas will seek permission to appeal the ruling. If the application is successful, preliminary issues will be re-heard by the English high court in a three-day hearing starting January 30, the company added.
Following the London court ruling, the bondholder group, led by Blackrock, called on the company to strike a deal.
But Dana Gas wants to pursue legal proceedings in the UAE regarding the validity of its sukuk, which are based on Mudarabah contracts.
“There remain numerous legal issues under UAE law relating to the validity of the Mudarabah Agreement which remain before the Sharjah UAE Federal Court and need to be determined,” Dana Gas said on Monday.
“The company will take such steps as it can to have the UAE proceedings dealt with as quickly as possible."
Dana Gas last month posted a 700 per cent increase in its third quarter net profit thanks to the favourable outcome of its arbitration dispute with the Kurdistan Regional Government (KRG) in August.
The increase in profitability came as the company reversed its provision for payments to the KRG.
Under the terms of the settlement, the KRG agreed to pay the Pearl Consortium — consisting of Dana Gas, its parent Crescent Petroleum, OMV of Austria, Germany’s RWE and Hungary’s MOL — a sum of $600m, together with a $400m payment to be allocated towards the consortium’s further investment in the region’s gas fields.
