Abu Dhabi-listed Dana Gas’ shares have soared after it announced plans to restructure a $700m Sukuk due in October because of concerns it is not Shariah compliant
In a bourse statement, the firm said it would call a committee of holders of its outstanding $350m 9 per cent ordinary certificates and $350m 7 per cent exchangeable certificates later today to set out an initial proposal for the restructuring.
“Due to the evolution and continual development of Islamic financial instruments and their interpretation, the Company has recently received legal advice that the Sukuk in its present form is not Shari’a compliant and is therefore unlawful under UAE law. As a result, a restructuring of the current Sukuk is necessary to ensure that it conforms to the relevant laws for the benefit of all stakeholders,” the company said.
It proposed exchanging the Sukuk with new enforceable Shariah complaint instruments at a four year tenor that give rights to profit distributions via cash and payment in kind at less than half the current profit rates without a conversion feature.
The company’s share price increased its daily limit of 15 per cent to Dhs0.69, it highest level since late 2014, following the announcement.
Dana argued the new instrument was an improvement as it was enforceable and would provide repayment to holds over time.
The firm said as its receivables and future damages payment may be unpredictable it would propose making prepayments under the new Sukuk either in whole or in part at par prior to maturity without any penalty.
Payments due on July 31 and October 31 would not be paid but would be accounted for as part of the new Sukuk, it added.
Dana has been facing a cash shortage due to missed payments from its assets in Iraq’s Kurdistan and Egypt.
The firm said the new proposed offer took this into account and would allow it to collect more than $900m of total receivables due from both governments and obtain awards for damages from the arbitration cases.
“The company’s risk profile has changed very positively and the outstanding balance of the Sukuk has been reduced from $1bn to the current $700, despite continued challenges around collections. The company however still needs time to deliver fully on its potential and in the meantime must preserve its financial strength so that it can realise the full value of its assets for the benefit of all stakeholders,” said CEO Patrick Allman-Ward.