Dana Gas PJSC plans to pay bondholders about $100 million in cash as part of the $920 million debt restructuring accord the United Arab Emirates company agreed this month, a person familiar with the deal said.
The cash would be paid to holders of the Shariah-compliant notes, or sukuk, once a lockup agreement between Dana Gas and its creditors is signed, likely later this month, according to the person, who asked not to be identified because the information is private. Dana Gas, which didn’t pay the $920 million sukuk when they matured at the end of October, said Nov. 7 it had reached a restructuring agreement with its main noteholders including a partial cash payout. A spokeswoman for Dana Gas declined to comment on the restructuring terms.
“It is the best case scenario for sukukholders, apart from getting fully repaid at maturity,” Gus Chehayeb, Dubai-based research director for the Middle East and North Africa at investment bank Exotix Ltd., said by phone today.
BlackRock Inc. and Ashmore Group Plc. hold more than 50 percent of the Islamic bonds, a person familiar with the deal said last month. Dana Gas said Nov. 7 the restructuring deal with the main sukukholders included splitting the outstanding securities into ordinary and convertible tranches with “revised economic terms” after an initial cash payment.
Half of the remaining securities will be converted into sukuk and the rest turned into convertible Islamic bonds, both maturing in five years, according to the person. The so-called blended yield on the two securities will be 8 percent, with the ordinary sukuk paying more than the bond’s existing 7.5 percent yield and the convertible notes paying less, the person said.
The rate at which the new convertible notes can be exchanged for shares is significantly lower than the 1.93 dirham price for the existing notes, the person said. Dana Gas shares closed at 39 fils on the Abu Dhabi bourse today. The conversion price would include a premium above the stock price in line with terms on recent convertible bonds, he said.
Dana Gas’ bonds rose 0.2 percent at 79.78 cents to the dollar at 5:18 p.m. Dubai time, according to data compiled by Bloomberg.
“The market was expecting a harsh restructuring and I think creditors got a better deal than the shareholders did,” Chehayeb said. For the shareholders, the terms clear “a dark cloud over the equity price” due to the prospect of a default, he said.
Dana Gas, which is based in the U.A.E. emirate of Sharjah, missed payments on the sukuk after facing payment delays from Egypt and Iraq’s Kurdistan region, its biggest sources of revenue, amid political unrest.