Dana Gas won’t repay $ 920 million sukuk
Dana Gas won’t repay $ 920 million sukuk
The UAE’s largest listed natural gas firm, hit by payment delays from Egypt and Iraq’s Kurdistan region, will not repay a $ 920 million convertible sukuk, when it matures today, the sources said.
However, Sharjah-based Dana has won more time to hammer out a deal with bondholders, they added.
Dana Gas declined to comment.
Although indebted firms in the UAE have extended maturities on billions of dollars in bank loans since the onset of the financial crisis in 2008-09, no sukuk have been restructured or unpaid on maturity.
Saudi and Kuwaiti companies have defaulted on Islamic bonds in the past, leading to complex debt negotiations which have dragged on for years. Kuwait’s Investment Dar, which co-owns luxury carmaker Aston Martin, defaulted on a $ 100 million Islamic debt issue in 2009.
Dana has a $ 1 billion sukuk maturing on Oct. 31. It repurchased about $ 80 million of the sukuk in 2008, leaving $920 million outstanding.
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.
A source said that London-based Spinnaker Capital was among large holders. An executive at Spinnaker in London said it does not own Dana Gas bonds currently and has not held them before. BlackRock owns about 30 percent of the outstanding sukuk, according to two separate market sources.
There is “absolutely no chance” of a white knight swooping in to repay the bond by the due date, a source close to the talks said.
In 2009, the Abu Dhabi government stepped in at the eleventh hour to help Dubai repay developer Nakheel’s $ 4.1 billion Islamic bond.
The sources said Dana, in which Crescent Petroleum owns a 20-percent stake, reached a standstill agreement with creditors in early October giving it six months to repay the bond.
Some creditors are preparing for a potential “post-default scenario,” one source familiar with the discussions said, in which no deal would be reached at all.
Shares in Dana fell 8.5 percent to AED0.43 on the Abu Dhabi bourse after the Reuters report before closing down 4.26 percent.
The shares have been battered by concerns over how Dana will find funds to repay the bond and limited communication from the company on the matter. The sukuk has a conversion price of AED1.926.
The sukuk, which is lightly traded, was quoted at a bid price of 68 cents on the dollar yesterday, down from 78 cents on the dollar on Monday, according to prices quoted by Nomura.
Dana is to issue a statement this week detailing its plans to restructure the bond, said two sources, who spoke on condition of anonymity as the matter is not public.
There was a “high probability” the Dana sukuk will be restructured, London-based investment firm Exotix said in a report earlier this year, adding its restructuring valuation on the privately-owned firm was 61.5 percent of par value.
Dana, which also has a 3-percent stake in Hungarian group MOL, is not seen as a strategic entity for the UAE and so any government support is unlikely.
In May, Dana said it wanted to find a consensual deal with sukukholders to repay the bond, and 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, which has operations in the UAE, Egypt and Iraq’s Kurdistan region, says its cash flow has been affected by global economic conditions and regional events, including Egyptian unrest last year which delayed payments.
The company had a cash balance of AED 601 million ($ 164 million) as of June 30, 2012. Outstanding receivables on Egypt gas deliveries stood at AED 729 million and AED 1.2 billion in the Kurdistan region at that time.
In a recent interview, Dana board member and Crescent Chief Executive Majid Jafar said Egypt was paying the company for all fuel it was receiving from its operations and was optimistic outstanding payments would be settled.
Jafar said last week talks between the company and creditors were still ongoing, and have been “amicable and friendly.”
Oil prices rise as China, US put trade war ‘on hold’
SINGAPORE: Oil prices rose on Monday as markets reacted to news that China and the US have put a looming trade war between the world’s two biggest economies “on hold.”
Brent crude futures were at $79.06 per barrel at 0650 GMT, up 55 cents, or 0.7 percent, from their last close. Brent broke through $80 for the first time since November 2014 last week.
US West Texas Intermediate (WTI) crude futures were at $71.71 a barrel, up 43 cents, or 0.6 percent, from their last settlement.
The US trade war with China is “on hold” after the world’s largest economies agreed to drop their tariff threats while they work on a wider trade agreement, US Treasury Secretary Steven Mnuchin said on Sunday, giving global markets a lift in early trading on Monday.
“The temporary trade dispute will de-escalate over time through negotiation,” US bank Morgan Stanley said.
“Both sides plan to work on implementing agriculture and energy purchases and to continue to negotiate on manufacturing and service trade, bilateral investment and intellectual property protection in coming months,” it added.
Still, crude prices were some way off the November 2014 highs reached last week as many traders and analysts say there is enough supply to meet demand despite ongoing production cuts led by the Organization of the Petroleum Exporting Countries (OPEC), plunging output in crisis-struck Venezuela and looming US sanctions against major oil producer Iran.
“Without a further escalation in geopolitical risk, oil might be due a pullback,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
BP’s Chief Executive Bob Dudley told Reuters he expected a flood of US shale and a possible reopening of OPEC taps to cool oil markets after crude rose above $80 a barrel last week.
Dudley said he saw oil prices falling to between $50 and $65 a barrel due to surging shale output and OPEC’s capacity to boost production to replace potential falls in Iranian supplies due to sanctions.
The US oil rig count, an early indicator of future output, was at 844, according to energy services firm Baker Hughes. That was the same count as the week before, which marked the highest level since March 2015.