Dana Gas

Dana Gas and partners start arbitration case against MOL over #Kurdistan settlement

Dana Gas and its partner Crescent Petroleum have begun arbitration proceedings against Hungary's MOL Group over Dana's settlement agreement with the Kurdistan Regional Government (KRG). The KRG agreed to pay $1 billion to the consortium and to reclassify some additional $1.24 billion from debt to outstanding costs. MOL is unsatisfied with the way Dana Gas, Crescent Petroleum and the Pearl consortium handled the settlement and would have pursued a final litigation and enforcement outcome against KRG instead. Dana and Crescent Petroleum own a combined 70% stake in the Pearl consortium, while Austria's OMV, Germany's RWE, and MOL each own 10%. The KRG settlement boosted Dana's cash balance and lifted the company's stock on the Abu Dhabi stock exchange by 14%. Last week Dana bondholders requested a $300 million cash paydown, but Dana refused the proposal and the case is now being disputed in a London High Court.

#UAE to reopen, #Kurdistan #deal to boost #Dana #Gas

The stock markets in the United Arab Emirates look likely to trade softly as they reopen on Monday after the Eid holidays, although Abu Dhabi's Dana Gas might just rise sharply after it reached an agreement on overdue payments from the government of Kurdistan.
The markets in the UAE are the only ones open in the Gulf. Others, like Egypt, will pick up trading later this week. There is no fresh, major corporate news in the UAE except Dana's settlement, which will see Kurdistan immediately pay Dana's consortium $1 billion, including $400 million that will be used for investment in the region. Dana will receive 35 percent of the money. In addition to Dana's share of the $600 million payment, "Future benefits to Dana Gas should be much larger, given the massive resource potential of the two fields, Khor Mor and Chemchemal. Dana Gas's share of 2P reserves in the two fields amounts to close to 1 billion barrels of oil equivalent, with huge upside", said Allen Sandeep, head of research at Cairo-based Naeem Brokerage. He continuid: "Overall, we view this as a major positive development for Dana Gas."

#Kurdistan pays $1 billion to Dana Gas, partners to settle London case

#Iraq’s Kurdistan region will immediately pay $1 billion to UAE-based Dana Gas and its partners to settle a long-running London court case. The full and final settlement of the $2.24 billion case is the latest effort by the semi-autonomous region to put its finances in order ahead of a referendum seeking independence from the government in Baghdad. Kurdistan has ramped up oil sales independent from Baghdad and is hoping to raise gas exports. The settlement is significant for both parties, with Kurdistan settling the dispute at a time it is working on reshaping public finances. For Dana, the Kurdish settlement will be eagerly watched by its bond holders which are disputing Dana's move to restructure its $700 million sukuk on the grounds it is no longer sharia-compliant.

Dana Gas bondholders could be liable for ‘unlawful’ #Sukuk

Holders of Dana Gas’s sukuk could be liable to repay the company excess on account profit payments. The company said it had sought legal advice on the matter. Advisers said that the terms of the Sukuk are not compliant with Shari’a principles and are unlawful under the laws of the United Arab Emirates (UAE). The company is now pursuing the litigation route to resolve the matter and is confident pursuant to independent legal advice of prevailing in its interpretation of the outcome.

Dana Gas #Sukuk: A red herring or cause for concern?

The recent move by Dana Gas to declare its approximately US$700 million of outstanding trust certificates unlawful has been a troubling development for the Islamic finance industry. Dana Gas has initiated proceedings in the UAE to declare the sukuk illegal and has secured a series of injunctions preventing enforcement by creditors, but the key question remains unanswered. That is whether non-compliance with Shari'a principles would have any bearing on the legal enforceability of these instruments. Any judgment in favour of Dana Gas could have wide ranging implications on the sukuk market. White & Case LLP argue that the concept of Shari'a-compliance should be treated as distinct from legal enforceability. Dar Al Sharia Legal & Financial Consultancy issued a pronouncement on the Shari'a-compliance of Dana Gas' sukuk at the time the sukuk were issued. Pronouncements of such nature are generally not open to retroactive invalidation as is being sought by Dana Gas.

#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.

Dana #sukuk: why the market is overreacting

The sukuk issued by Sharjah-based Dana Gas and recently denounced as non-shariah compliant will not damage confidence in the Islamic debt markets, as some have claimed. The gas provider's announcement in June that $700 million worth of its bonds are not compliant with shariah law in the United Arab Emirates (UAE) perplexed the market. The firm’s chief investment officer, Mohieddine Kronfol, said that the impact of this restructuring will be insignificant to the wider industry in the long-term. He added that Dana Gas is owed around $1 billion from Iraq and Egypt, Dana Gas is only one issuer in a global sukuk market with over 90 issuers. In his opinion, the media and public attention spent on Dana Gas is out of proportion with what has transpired so far.

Dana Gas describes UK court decisions on #sukuk as favourable

Dana Gas described decisions by the High Court of Justice in London as favourable, as the company seeks to restructure $700 million of outstanding sukuk. On July 5 the High Court upheld an injunction blocking holders of the bonds from enforcing claims related to the securities against Dana. The court ordered Dana to cancel an injunction in a court in Sharjah and to seek a stay of proceedings there. The company remains keen to engage with sukuk holders and reach an agreement on a consensual basis, which is not prevented by the injunctions in place.

Dana gas saga far from over

Last month, Dana Gas tried to impose on investors a restructuring of the payment of its two outstanding sukuk tranches totalling US$700 million. The company got an injunction in the High Court in London restraining sukuk holders from taking any hostile action against Dana. The overriding concern is that if the High Court in London rules against Dana Gas, the matter goes to trial and Dana Gas wins, it would set an appalling precedent that can undermine the integrity of sukuk as a fundraising instrument. Syariah advisories agree that the only solution would be the introduction of a world sukuk standard supported by local laws, an Apex Sukuk Standard, which would give legal and syariah certainty. Any dispute could either be subject to arbitration or recourse to law. Dana Gas re-scheduled yet another conference call with sukuk holders to discuss the matter. The High Court in London scheduled a hearing for September. This saga is far from over.

UAE's Dana Gas aims to propose new #sukuk terms in coming weeks

According to Dana Gas CEO Patrick Allman-Ward, the company aims to communicate proposed terms of a restructured sukuk issue in coming weeks. He spoke to sukuk holders in a conference call, but there was no question and answer session and no immediate response from creditors. In mid-June, Dana stunned creditors by announcing it would halt payments on its four-year sukuk because they no longer complied with changing interpretations of the Sharia code. Dana said it would exchange the sukuk for new Islamic instruments with lower profit rates than the existing paper. Investors and bankers are concerned that other sukuk issuers could imitate Dana in refusing to redeem paper on the grounds that it has lost its sharia-compliance. CEO Allman-Ward insisted that Dana's arguments did not apply to other, lawful sukuk formats. Dana's existing paper features profit rates of 7 and 9%. The new sukuk would provide profit distributions at less than half the rates. Sukuk holders are contesting the plan in courts in London and the emirate of Sharjah.

Amid Dana debacle, Islamic finance seeks safeguards against illegality claims

The Islamic finance industry is seeking ways to safeguard deals against challenges to their religious permissibility. Sharjah-based Dana Gas declared it would not make payments on $700 million of sukuk because Islamic finance standards had changed since the instruments were issued. This raised concern across the Islamic finance industry that more companies could avoid redeeming sukuk by adopting the same argument as Dana. To try to avoid similar cases in future, investors may demand more detailed and restrictive language in sukuk documentation. Such language already exists for some sukuk, but it is not used consistently and is not standardised. Investors may also screen the groups of scholars who provide sharia endorsements for sukuk. The newly formed high sharia authority for Islamic banking and finance is expected to set rules and a general framework for Islamic finance governance in the United Arab Emirates.

London court to hear Dana Gas #sukuk case in September

London's High Court plans to hold a full hearing in September on efforts by Abu Dhabi-listed Dana Gas to restructure $700 million of its outstanding sukuk. Dana Gas declared the bonds invalid last month, saying they were no longer compliant with changing interpretations of the Sharia law. The judge upheld an interim High Court injunction blocking holders of the bonds from enforcing claims related to the securities against Dana Gas. However, he imposed restrictions on asset sales by Dana and its ability to raise more debt or pay dividends. The case has worried the Islamic finance industry as it has raised the prospect that other firms could justify not honouring obligations by claiming sharia-based financial standards had changed.

CIMB Islamic CEO says Dana Gas’ case is a dud, won’t hurt market

According to Mohamed Rafe Mohamed Haneef, CEO of CIMB Islamic Bank, Dana Gas’s case will leave the global Islamic finance industry relatively unaffected. Dana Gas said it no longer considered its two securities due in October as compliant with Islamic principles under UAE law. Unlike Malaysia, most Arab countries have no centralised Shariah boards to approve deal structures. In Haneef's opinion, Dana Gas’s case will probably be dismissed, as the sukuk agreement is subject to laws in both the United Arab Emirates and the U.K. A U.K. court is due to issue a ruling on Dana Gas' attempt to extend an injunction preventing sukuk holders from taking action regarding the debt. The company has proposed restructuring the notes on terms that are less advantageous to investors and plans to explain the legal action on a conference call with investors on July 6.

UAE's Dana Gas will try again to hold call on #sukuk restructuring

Dana Gas has rescheduled a telephone call with sukuk holders to this Thursday at 4 p.m. The call would outline the company's proposal to restructure its outstanding $700 million of sukuk. Dana is claiming it must exchange the instruments because they are no longer lawful following changes in Islamic finance. The company had originally scheduled the call for June 21, but on that day it decided to postpone the call. Dana said it made several approaches to an ad hoc committee of creditors to arrange a call but each invitation was declined.

Dana debacle highlights need for unified Islamic finance regulator

A recent report from Standard & Poor’s said that Islamic financial assets had accelerated toward the end of 2016, but that such progress was unsustainable in the long term. The agency pointed out too that a lack of standardization was a barrier to creating a truly global industry based in the Middle East. The Islamic economy would continue to grow but at much lower rates than in the boom years from 2007 onward. It is against this background that recent events at Dana Gas should be seen. In 2013, the company issued sukuk totaling $700 million. Dana, which does a lot of its business in Egypt and Iraq, had problems getting paid in those countries. Earlier this month, Dana said it had received new legal advice which meant its sukuk were no longer to be considered Shariah-compliant. The Dana debacle confirms the belief that what is really needed is a much more standardized regulatory approach in the Islamic finance market.

Fitch: Dana Gas case highlights #Sukuk's legal uncertainties

According to Fitch Ratings, credit rating implications for sukuk arising from Dana Gas's attempt to have its mudaraba sukuk declared unlawful will take time to emerge. The impact of the move remains unclear until all relevant proceedings are resolved. Fitch added that sharia compliance typically does not have credit implications for Fitch-rated sukuk. Fitch does not rate Dana Gas or its sukuk. Dana Gas started court proceedings in the UAE to have its sukuk declared unlawful and unenforceable in the UAE. Sukuk regulations have been introduced and updated in several countries in recent years, but standardisation, harmonisation and legal precedents are limited in most jurisdictions. This case could set an important precedent for the relationship between sharia compliance and credit risk, and give greater clarity on enforceability.

Moody's: Dana Gas Shari'ah breech is credit negative for #Sukuk investors

Dana Gas petitioned the English High Court of Justice for injunction after commencing legal proceedings in Sharjah courts to have its Mudharaba Sukuk declared unlawful. Dana Gas publicly stated on 13 June 2017 that its $700 million Sukuk in its present form is not Shari'ah compliant and is therefore unlawful in the UAE. If the company's petitions are upheld by the Sharjah courts, it would trigger a standstill on the two upcoming contractual payments, a credit negative for the Dana Gas Sukuk investors. Although most investors regard the company’s announcement as a tactical move in its debt negotiations, a ruling in favour of Dana Gas would potentially send shockwaves among Islamic finance and Sukuk investors.

Fitch: Dana Gas Case Highlights #Sukuk Legal Uncertainties

According to Fitch Ratings, credit rating implications for sukuk arising from Dana Gas's attempt to have its mudaraba sukuk declared unlawful will take time to emerge. The impact of the move remains unclear until all relevant proceedings are resolved. Fitch added that sharia compliance typically does not have credit implications for Fitch-rated sukuk. Fitch does not rate Dana Gas or its sukuk. Dana Gas started court proceedings in the UAE to have its sukuk declared unlawful and unenforceable in the UAE. Sukuk regulations have been introduced and updated in several countries in recent years, but standardisation, harmonisation and legal precedents are limited in most jurisdictions. This case could set an important precedent for the relationship between sharia compliance and credit risk, and give greater clarity on enforceability.

Goldilocks Investment builds Dana Gas stake

An Abu Dhabi Global Market fund, Goldilocks Investment, has acquired 5% of Dana Gas. Goldilocks has a reputation of buying companies going through financial difficulties. Goldilocks has recently acquired 350 million shares in Dana Gas, which has seen its share price rise by nearly 70% in the past month. Goldilocks is part of Jassim Alseddiqi's Abu Dhabi Financial Group, a diversified investment company with about US$5 billion under management. Dana Gas has assets in Egypt and the Kurdish region of Iraq that have had good operational results but have suffered from erratic payments. Dana Gas also has an ongoing dispute with holders of its $700 million in sukuk, for which it has taken preemptive legal action to avoid a declaration of default.

Lessons from Dana Gas #Sukuk debacle

Dana Gas invited holders of its outstanding sukuk to open discussions on restructuring the payment. The reason given by Dana Gas was that the sukuk has now been declared non-syariah compliant and, therefore, not valid. The company also proposed to exchange the sukuk with a new four-year enforceable, syariah-compliant instrument. It seems that Dana Gas is trying to restructure cheap on the back of credit deterioration, hiding behind the façade of syariah validity. Moreover, the company has filed for protection in the Federal Court in Sharjah to impose its structuring plan on certificate holders. It is obvious that the sukuk debacle may have serious implications for Dubai’s ambitions of being a premier sukuk origination and Islamic economy hub. The Dana Gas sukuk is a failure of inadequate capital market legal framework, underdeveloped regulatory framework and a serious lack of uniformity.

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