Dana Gas, in talks to restructure a $920m Islamic bond, is offering bondholders cash and an average 8 percent coupon on two new sukuks to replace the existing one, two sources said.
The natural gas producer became the first UAE company to miss a bond redemption when the sukuk matured on October 31. Dana reached the restructuring deal on November 7, potentially averting the seizure of its Egyptian assets.
Bondholders will be paid between $80-$90m in cash and the new bonds will be equally split between a sukuk and a convertible bond, one person familiar with the matter said.
After the cash payment, the balance on the Islamic bond - which is mainly held by investment firms such as Ashmore Group and BlackRock - will be replaced by two equal tranches that mature in 2017.
The coupon on the combined bond is 8 percent, slightly above the 7.5 percent on the original sukuk but on a lower amount of debt.
"Bondholders are quite happy with the offer which does not include a hair cut as the market had previously expected," the source said. "The other alternative of seizing the underlying assets wasn't the bondholders' best option."
A Dana spokeswoman declined to comment.
In 2008, Dana repurchased about $80m of the five-year sukuk.
Dana's restructuring agreement with its ad-hoc committee of creditors gives it a breather to sort out its finances. The Abu Dhabi-listed firm, which is based in the emirate of Sharjah, has been hit by payment delays on gas it supplies to Egypt and Iraq's Kurdistan region.
The terms of the proposed new sukuk instruments have been agreed by bondholders and are expected to be made public as early as next week, the source said.
Dana, in which Crescent Petroleum has a 20 percent stake, had AED516m ($140m) cash at September 30, its third-quarter earnings statement showed.
But receivables delays continued to soak up cash. The company is owed $350m from the Kurdistan government and $200m from Egypt. The company has a 3 percent stake in Hungarian group MOL worth close to $280m.
London-based investment firm Exotix said in a research note on November 8 that the announced restructuring terms were "creditor friendly" and "a sharp turnaround from Dana's previously harsh stance towards creditors."