Dana Gas PJSC said it’s in talks with creditors to extend and amend the terms of about $1 billion in sukuk that matured yesterday as the United Arab Emirates fuel producer’s third-quarter profit dropped 27 percent.
The company, based in the U.A.E. emirate of Sharjah, hasn’t paid the principal amount of $920 million or the accrued profit of $18.75 million, it said in a statement to the Abu Dhabi bourse today. The shares, which plunged 8.9 percent yesterday, gained 2.4 percent to 42 fils at 10:53 a.m. in the emirate.
The company’s 7.5 percent Shariah-compliant notes slumped this year, missing a rally in regional sukuk, after political upheaval in Egypt and Iraq’s Kurdish region, the gas producer’s main sources of revenue, led to payment delays and triggered a funding shortage. Net income dropped to 104 million dirhams ($28 million) from 143 million dirhams a year earlier, missing the 164 million-dirham estimate of EFG-Hermes Holding SAE, according to data compiled by Bloomberg.
“We still believe that this will be restructured but the risk of a default has grown dramatically over the last few days,” Gus Chehayeb, Dubai-based research director for the Middle East and North Africa at Exotix Ltd., said.
The announcement casts doubt on whether the company has reached a so-called standstill agreement with creditors, he said. The two sides last month reached such an accord, under which creditors make no effort to collect debt payments, a person familiar with the talks said Oct. 30. The agreement will be effective until one party decides to end it, the person said, asking not to be identified because the information is private. Dana Gas made no mention of the deal in its public statements.
“Dana Gas is in ongoing discussions with an ad-hoc committee of sukuk holders over terms to amend and extend the sukuk,” the company said today.
Deutsche Bank AG, Blackstone Group LP and Latham & Watkins LLP are advising Dana in the sukuk talks. Holders of the Islamic debt hired London-based law firm Linklaters LLP, three people familiar with the matter said in May.
The debt is secured against Dana Gas’ Egyptian assets as well as Sajaa Gas Private Ltd. and United Gas Transmissions Co., part of a venture to supply Iranian gas to the U.A.E. that hasn’t yet started. The company said it had paid $356 million to bondholders over the past five years.
Dana Gas’s third-quarter net revenue fell 12 percent to 395 million dirhams, while trade and other receivables, representing money owed to the company, rose to $622 million at the end of September from $501 million three months earlier.
“The results that came out are quite disappointing,” Chehayeb said.
The company said its funding challenges were “short term,” adding it was “encouraged” by recent developments on outstanding payments. The Egyptian government “in particular made significant efforts to address the backlog of payments due,” it said.