First UAE company to not pay sukuk

First UAE company to not pay sukuk

UAE's Dana gas shuffles board amid debt talks

Saudi and Kuwaiti companies have defaulted on Islamic bonds in the past, leading to complex debt negotiations which have dragged on for years.

October 31, 2012 10:00 by Reuters

STOCKS AND BONDS SINK

Shares in Dana fell 8.5 percent to 0.43 dirhams on the Abu Dhabi bourse after the Reuters report before closing down 4.26 percent.

The shares have been battered by concerns over how Dana will find funds to repay the bond and limited communication from the company on the matter. The sukuk has a conversion price of 1.926 dirhams.

The sukuk, which is lightly traded, was quoted at a bid price of 68 cents on the dollar on Tuesday, down from 78 cents on the dollar on Monday, according to prices quoted by Nomura.

Dana is to issue a statement on Wednesday or early Thursday detailing its plans to restructure the bond, said two sources, who spoke on condition of anonymity as the matter is not public.

There was a “high probability” the Dana sukuk will be restructured, London-based investment firm Exotix said in a report earlier this year, adding its restructuring valuation on the privately-owned firm was 61.5 percent of par value.

Dana, which also has a 3-percent stake in Hungarian group MOL, is not seen as a strategic entity for the UAE and so any government support is unlikely.

PAYMENT PROBLEMS

In May, Dana said it wanted to find a consensual deal with sukuk holders to repay the bond, and said it had hired Blackstone Group, Deutsche Bank and law firm Latham & Watkins as advisers.

Investors have hired Moelis and law firm Linklaters as advisers.

Dana, which has operations in the UAE, Egypt and Iraq’s Kurdistan region, says its cash flow has been affected by global economic conditions and regional events, including Egyptian unrest last year which delayed payments.

The company had a cash balance of 601 million dirhams ($164 million) as of June 30, 2012. Outstanding receivables on Egypt gas deliveries stood at 729 million dirhams and 1.2 billion dirhams in the Kurdistan region at that time.

In a recent interview, Dana board member and Crescent Chief Executive Majid Jafar said Egypt was paying the company for all fuel it was receiving from its operations and was optimistic outstanding payments would be settled.

Jafar said last week talks between the company and creditors were still ongoing, and have been “amicable and friendly.”

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Tags: Dana Gas