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Dana Gas creditors to thrash out sukuk deal
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Monday, 21 May 2012

Dana Gas could become the first company in the UAE to restructure a bond as concerns rise that it will not have enough cash to repay USD 1 billion convertible sukuk Islamic bond at maturity in October.

The Abu Dhabi listed firm said that it had hired advisers to help it weigh options for repayment of USD 920 million still outstanding on the out of the money convertible and was committed to finding a consensual solution.

Mr Thomas Christie fixed income sales trader at Rasmala investment bank said that “The credit is definitely distressed. The company's lack of definitive repayment announcements has pushed this further drop.”

Natural gas producer Dana, which has operations in the UAE, Egypt and Iraq's Kurdistan region said that its cashflow has been affected by global economic conditions and regional events including Egyptian unrest last year which delayed payments.

Below are some possible scenarios the company will be weighing as it tries to thrash out an agreement with holders of the sukuk, thought to be mostly global investment funds.

Dana has hired Blackstone Group, Deutsche Bank and law firm Latham & Watkins as advisers, while investors have hired law firm Linklaters, one source told Reuters.

A repayment in full and on time is seen as highly unlikely because the company has indicated it does not have cash reserves that would enable it to meet its obligations at maturity.

In its latest financial statements, the Gulf region's only listed natural gas company said its cash balance was AED 524 million at March 31. Refinancing the sukuk could also be a challenge.

European banks have already pulled back from non core lending activities and the cost of funding is high, especially for unrated and non-government related entities.

Despite relatively higher liquidity in the local banking sector, credit growth among most UAE banks remains weak. Tapping debt markets to refinance the sukuk would result in significant premiums, given scrutiny of the existing bond.

Source - Reuters


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