Dana Gas Co, the first UAE company to fail to meet a bond redemption, said it had reached a restructuring deal “in principle” to repay a $1 billion sukuk, potentially averting seizure of its assets.
Natural gas producer Dana, headquartered in the emirate of Sharjah, said it will cancel $80 million of the Islamic bond and sukuk holders will receive a part payment in cash from Dana as part of deal reached with an ad-hoc group of bond holders.
It did not say in its statement how much it would pay bond holders. Dana’s cash position stood at 516 million dirhams ($140.5 million) at Sept. 30, according to its Q3 earnings statement.
The remaining amount of the sukuk will be split between a new ordinary sukuk and a new convertible one with revised economic terms, Dana said. It gave no further details.
“We are very pleased to have reached an agreement, which we believe best preserves the interests of all stakeholders,” Dana Chairman Adel Khalid Al-Sabeeh said in the statement.
Dana's shares, which were suspended to allow for the statement to be made, remained unchanged to the pre-announcement price - up 4.9 percent at 0740 GMT.
Anastasios Dalgiannakis, institutional trading manager at Mubasher, said it was hard to assess the implications of the deal without full details but it was likely to be negative for equity holders.
“The element of a new convertible increases the risk of dilution for shareholders and the ordinary sukuk increases the risk of Dana adding further assets (such as those in Kurdistan) as security, which will mean subordination for equity holders,” he said.
The company said it had entered into a standstill agreement with the creditors committee. The sukuk matured on Oct. 31. Dana repurchased about $80 million of the sukuk in 2008, leaving $920 million outstanding.
A source close to the creditors told Reuters last week that bond holders were considering claiming the Egyptian assets of Dana Gas, which were used as security against the issue.
Dana formally acknowledged on Monday that it had failed to redeem a $920 million Islamic bond and asked holders of the sukuk to decide on their course of action.
Dana has been hit by payment delays on the gas it supplies to Egypt and Iraq’s Kurdistan region.
Its shares have slumped on the Abu Dhabi bourse since Reuters reported last week that the company was set to miss the repayment deadline.
The sukuk is said to be held by large investment firms like BlackRock Inc and Ashmore Group.
Dana is advised by The Blackstone Group, Deutsche Bank and law firm Latham & Watkins. The ad hoc group of creditors is advised by Moelis and Linklaters.