The Sharjah-based energy company is embroiled in court case over the legality of its $700 million sukuk
Dana Gas to challenge fresh injunction barring dividends in sukuk battle
Dana Gas, the Sharjah-based energy company embroiled in court battles over the legality of its $700 million sukuk, said it received a new injunction from a UK court related to the ongoing dispute with its creditors.
The latest injunction prevents the company from paying dividends unless it also sets aside money to redeem the sukuk, the company said in a statement to the Abu Dhabi Securities Exchange, where its shares are listed. It plans to challenge the injunction brought by a US-based investment advisory firm.
“The company plans to challenge the order vigorously, and will claim any damage from [the claimant] and any party assisting it (either directly or indirectly) that Dana Gas and its shareholders may suffer consequent to it,” the company said on Sunday.
On March 25, the board of Dana Gas recommended distributing 5 per cent of the company's capital as a cash dividend for the financial year 2017 - which would be the first cash dividend in its trading history. The proposal is subject to shareholder approval during a general assembly on April 11.
Dana Gas shocked creditors, including investment bank Goldman Sachs and the world’s largest asset manager BlackRock, last year when it declared the $700m sukuk illegal, citing changes in sharia law.
The company argued that it is was, therefore, not obliged to repay the debt, and has faced legal action from creditors as a result.
The latest order was obtained in the English High Court by Putnam, a special purpose vehicle managed by US-based private equity firm Contrarian Capital Management, an investment advisor to various funds and managed accounts holding certificates in the Dana Gas sukuk.
Dana Gas said the “surprise” order was made on an ex-parte basis, meaning the Sharjah company was not represented and without its advance notice, the statement said.
The company said it was ordered by the English court to notify shareholders of the injunction via a statement on the exchange. Dana Gas considers this requirement “highly unusual” and plans to review the injunction with lawyers, it said.
The Putnam order follows an anti-suit injunction awarded by a Sharjah court against BlackRock, which holds Islamic bonds issued by Dana Gas.
The injunction request was made by one of Dana’s shareholders, and prevents Blackrock and related parties from “directly or indirectly from taking any proceedings against Dana Gas or its shareholders in the UAE and the UK…” until pending UK judgments are referred to the UAE judiciary to ascertain whether they can be enforced in the UAE.
Dana’s statement on Sunday said it was “unaware whether steps have been taken by BlackRock, the Trustee and Delegate to comply with the Sharjah UAE Federal Court order to submit the English court judgments to the UAE judiciary.”
The law firm representing Contrarian is the same as that representing BlackRock in the English Court, the statement added.
BlackRock did not immediately comment on the new injunction. Contrarian and its lawyers also did not immediately respond to requests for comments from The National.
Despite the dispute, Dana Gas is pursuing its strategy of recovering outstanding receivables.
The company last month said it received $10.4m from the sale of Egyptian natural gas condensate, as part of the Gas Production Enhancement Agreement signed with the Egyptian government in 2014 – a mechanism to restart income generation in the North African country and help pay down overdue receivables.
In February, the energy firm reported a net profit of $83m compared with a loss of $88m a year earlier, helped by a $1 billion payment from the Kurdistan Regional Government as part of a long-running dispute over gas payments.