Dana Gas shareholder backs restructuring deal

Largest shareholder Crescent Petroleum says terms of $920m debt deal are fair
By Reuters
Wed 09 Jan 2013 08:16 PM

Crescent Petroleum, the biggest shareholder in Dana Gas, said the terms of Dana's planned $920m debt restructuring deal are fair and protect shareholders.

Crescent Chief Executive Majid Jafar, who is also a board member of Dana, described the deal as "an optimum balance to serve interests of all stakeholders".

Abu Dhabi-listed Dana, hit by delays on payments for its supplies of natural gas to Egypt and Iraq's Kurdistan region, reached an agreement with creditors in December to amend terms of a $920m Islamic bond, which it had failed to pay at maturity in October.

Dana offered bondholders $70m in cash and agreed to refinance the remaining $850m of debt through two new five-year Islamic bond issues - one an ordinary sukuk and the other convertible into equity - paying an average return of 8 percent.

The company has not yet obtained official shareholder approval of the deal. Its shareholders are expected to meet to discuss the matter in the first quarter of 2013.

"Having it all equity-linked would have resulted in too much of a potential dilution for the existing shareholders, and that's the reason it was split to minimise the dilution of shareholders," Jafar said in an interview on Wednesday.

Crescent, based in the UAE, owns 22 percent of Dana.

Dana's outstanding sukuk is held by large global firms such as Ashmore Group and BlackRock, trader say. It is trading at about 86 cents on the dollar, up from 82 in early December before the restructuring was announced, according to investment bank Exotix.

In a report last month, Exotix said the restructuring deal would dilute shareholdings only to a minor degree.

"Under a maximum dilution scenario where the conversion price is set and exercised at 0.75 dirhams per share, we calculate that our stock fair value will only fall by 3 percent to 0.87 dirhams per share," Exotix said. The stock currently trades at 0.49 dirhams.

Dana said in December that it expected the debt restructuring to be completed by the second quarter of 2013. Jafar said Dana would hope to pay down some of its restructured debt before maturity.

The restructuring deal "is a five-year recommitment to the company from the sukuk holders and gives us the flexibility to pay it down earlier", he said.

Jafar also said Dana was preparing for a possible listing of its upstream assets on an international stock exchange.

"Spinning off upstream assets and listing them on an international exchange is one possibility. Dana Gas is already quite advanced in doing the preparatory work, legal and accounting, regulatory and financial," he said.

Beyond the financial terms of the restructuring, investors are concerned about political and economic developments in Egypt and Iraq, where the bulk of the company's operations are located.

In early December, Dana's outstanding receivables amounted to $220m in Egypt and $350m in Iraqi Kurdistan, according to a company statement. That compares with a total of AED1.74bn ($474m) at the end of 2011.

Jafar said, however, "The cash position of the company is healthier than a year ago, with total financial resources of around $400m despite the receivables."

He said that despite the payment delays, he was positive about prospects in both areas.

In Kurdistan, Dana has seen no disruption to operations from a dispute between local authorities and Iraq's central government over oil exports, he said.

In Egypt, the government sees the oil and gas sector as critical for the economy, which suggests problems will eventually be resolved, he said.

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