Sharjah energy firm missed October 31 deadline for repayment of US$920m Islamic bond
Dana Gas said it was in talks with bondholders to amend and extend the terms of a US$920m sukuk after becoming the first United Arab Emirates company to fail to repay a bond on maturity.
The UAE's largest listed natural gas firm, hit by payment delays from Egypt and Iraq's Kurdistan region, said on Thursday it had also missed a US$18.75m accrued profit payment due on October 30.
Dana, which was floated on the Abu Dhabi bourse in 2005 by parent Crescent Petroleum, had a US$1bn sukuk maturing on October 31. It repurchased about US$80m of the sukuk in 2008, leaving US$920m outstanding.
"Dana Gas is in ongoing discussions with an ad-hoc committee of sukuk holders over terms to amend and extend the sukuk," it said in a bourse statement.
Sources told Reuters on Tuesday the Sharjah-based firm would not repay the sukuk upon its October 31 maturity. They said the two sides had entered a so-called standstill, valid for up to six months, in early October to allow talks to continue.
Bondholders are yet to issue a formal statement.
Dana's problems worsened in 2011 after political unrest in the region led to payment delays from Egypt and Iraq's Kurdistan region. It had outstanding receivables of AED754m (US$205m) in Egypt and AED1.33bn in Kurdistan as at September 30.
The five-year sukuk, which was issued with a 7.5 percent coupon, has gained international interest as a majority of the debt is said to be owned by large investment firms including BlackRock Inc and Ashmore Group.
Dana said liquidity challenges, mainly due to non-payments from Egypt and Kurdistan, are "short-term" and it is committed to finding a consensual solution with the bondholders.
"Telling investors that they have successfully paid all coupon payments thus far and are committed to a consensual arrangement is pretty lame. Bottom line is that they (Dana) didn't pay the US$920m that was due yesterday," Chavan Bhogaita, head of markets strategy at National Bank of Abu Dhabi said.
In May, Dana 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's shares and bond have been under pressure on investor worries of non-payment of the outstanding bond.
The shares rose 4.9 percent on the Abu Dhabi bourse on Thursday. The sukuk, which is lightly traded, was quoted at 66 cents to the dollar according to prices from Nomura Holdings, unchanged from Wednesday's close.
"This was well-flagged and with the restructuring, sukuk holders will be looking at any way Dana can monetise its assets," said Amer Khan, fund manager at Shuaa Asset Management.
In a separate statement, Dana said its third-quarter net profit fell 27 percent to AED104m (US$28.31m) from AED143m a year ago. Its cash balances as at September 30 stood at AED516m.
Revenue for the period dropped to AED512m, a decrease of 21 percent from the year-ago period due to decline in Egypt production and lower hydrocarbon prices, Dana said.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.