Dana Gas PJSC, which missed payments on nearly $1 billion of Islamic bonds last week, reached a restructuring deal with sukukholders including BlackRock Inc., averting a potential seizure of its Egyptian energy assets.
The United Arab Emirates-based fuel producer has an in-principle agreement with creditors and will convert the Islamic bonds into an ordinary and a convertible sukuk with “revised economic terms,” the Sharjah-based company said today in a statement to the Abu Dhabi stock market. Holders of the Islamic bond or sukuk will also receive a partial cash payment.
The missed payment on Oct. 31 prompted speculation that debt-holders may seek to seize the company’s gas fields in Egypt. BlackRock, the world’s largest asset manager, and London-based Ashmore Group Plc own more than 50 percent of the notes, according to two people familiar with the restructuring, who asked not to be identified because the information is private.
“The outcome is positive and reassuring to shareholders and also important on the implication of the credibility of the debt capital market in the U.A.E.,” said Mohammed Ali Yasin, managing director of Abu Dhabi Financial Services Co., the brokerage unit of National Bank of Abu Dhabi PJSC. “If that failed, it would have had a huge negative implication on the future of companies coming to market.”
Dana Gas’ sukuk rose for a second day to 65.82 cents to the dollar yesterday, after falling 16 percent last week, according to data compiled by Bloomberg. The shares advanced 4.9 percent to 43 fils, set for the highest close since Oct. 30, at 2:05 p.m. in Abu Dhabi.
Some companies and state-owned enterprises in the U.A.E. teetered on the brink of default at the height of the global financial crisis. Dubai World, one of the emirate’s holding companies, roiled global markets in 2009 after seeking a standstill on about $25 billion of debt.
Sukuk holders were to get 19,077 shares for every $10,000 of bonds at a conversion price of 1.93 dirhams for each share in the old agreement, according to data compiled by Bloomberg.
Dana Gas made a profit payment due on Oct. 30 and will announce details of new terms after a so-called lock-up agreement is reached, it said. The deal envisages that $80 million of the sukuk currently held by the company will be canceled. The company said Nov. 5 investors need to confirm whether they want the trust holding the assets to be broken up.
“On the face of it, it looks to be a creditor-friendly deal and a 180 degree turnaround from the company’s last stance to its creditors,” Ahmad Alanani, Middle East director at Exotix Ltd. in Dubai, said by phone. “The devil is in the detail so we will reserve final judgement until then.”
Political instability in Egypt and Iraq’s Kurdish region, Dana Gas’ biggest sources of revenue, led to payment delays this year, hurting the company’s profit, which fell 27 percent in the third quarter.
The prospects for receiving outstanding payments from Iraq’s Kurdish regional government have improved and political stability returned to Egypt with the election of a president in June. Ashti Hawrami, the Kurdish natural resources minister, said Sept. 30 that the Iraqi government informed him it would start paying money on that day to oil companies pumping crude in the northern region.
“This is a step in the right direction,” said Nabil Farhat, a partner at Abu Dhabi-based brokerage Al Fajr Securities LLC. “However, investors would like further information on the convertible sukuk as far as the amount and the conversion price.”
Dana Gas appointed Deutsche Bank AG, Blackstone Group LP and Latham & Watkins LLP to advise on the restructuring, while sukuk-holders hired investment bank Moelis & Co. and law firm Linklaters LLP.