Dana Gas Gets U.K. Court Order in $700 Million Islamic Bond CaseBy and
London judge extends injunction blocking holders from action
Dana says sukuk deals are invalid; trial scheduled for October
Dana Gas PJSC won an extension of a London court order blocking investors from taking action over $700 million in disputed Islamic bonds until after a trial scheduled for as soon as October.
Dana, which has operations in Egypt and Iraq, sent shockwaves through the world of Islamic finance by announcing in June that its own sukuk were not Shariah compliant. The U.K. court hearings are part of a global legal effort by the company, including filings in the United Arab Emirates and British Virgin Islands, to stop investors from trying to force payment.
London Judge David Waksman agreed to extend the injunction, saying that if Dana was found to be in default it could cause “real reputational damage.” The court order temporarily prevents holders of the securities from trying to have the transactions dissolved, meaning they would be paid early and in full. The proper way to resolve the dispute is with a full trial, to be held before the end of October, when the sukuk principal is due to be repaid, Waksman said.
“It’s disappointing news for the creditors, but all it does is say that the injunction is in place potentially till October,” said Abdul Kadir Hussain, the head of fixed-income asset management at Arqaam Capital Ltd., which has holdings in Dana Gas’s sukuk. “But come October, I don’t think any court anywhere is going to deny the fact that this is a debt obligation that Dana has to repay. Right now, it’s just a question of the relative strength of each party during the negotiation process.”
Dana, a Sharjah, U.A.E.-based producer of natural gas, is trying to restructure its debts and failed to convince investors to replace the current sukuk with four-year bonds that are less profitable for holders. While the company is awaiting payments totaling almost $1 billion from Egypt and Iraq’s Kurdish region, its lawyer Alain Choo Choy denied that Dana’s claims about the legality of the sukuk were motived by its financial position.
Dana has agreed not to take action that would impair its financial position before the trial, Waksman said.
Deutsche Bank AG, which represents the interests of sukukholders, opposed extending the injunction at a London court hearing Tuesday, saying that Dana’s real motivation was to “enhance its own position by prevent the certificate holders from exercising their rights,” according to the bank’s court documents.