Dana Gas takes offer to creditors off the table in $700m sukuk row

Updated 31 July 2017
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Dana Gas takes offer to creditors off the table in $700m sukuk row

LONDON: Dana Gas has revoked an offer to creditors to exchange its outstanding $700 million Islamic bond for new notes, ending the chance of a consensual resolution to a case that could shape the future of the global Islamic finance industry.
Dana is refusing to repay holders of its Islamic bond, or sukuk, which matures in October. The energy firm said last month it had received legal advice that the bond was no longer Sharia-compliant in the UAE following changes in Islamic finance interpretations over recent years, and was therefore unlawful.
Creditors claim Dana has to pay them back. They argue if the sukuk was legal when the deal was struck, it holds, and if it was illegal then it would mean the company is in default.
The dispute — which now looks set to be decided in the courts — is being closely watched by investors and banks across the Islamic finance industry because it could set a precedent for other sukuk issuers to refuse to redeem their paper on the grounds that it is no longer Shariah-compliant.
Dana, which is seeking to restructure the sukuk, last month outlined a potential offer to replace the bond with new notes with less than half the profit rate of its outstanding sukuk. The company said on Monday that this had been rejected by creditors and that the proposal was now “off the table.” It said it would now pursue “litigation-driven outcomes.”
It now falls to courts in Britain and the UAE to decide whether the sukuk is legal and if the original deal is valid.
“This is a lose-lose for the company and for sukuk holders, as it will draw out the whole process,” said Abdul Kadir Hussain, head of fixed income asset management at Arqaam Capital in Dubai.
In Islamic finance there are a wide range of opinions about what is Shariah-compliant. The compliance, or religious permissibility of an instrument, is decided by the scholars who design instruments and advise investors on what is permissible to buy. Views can change over time.
The Dana Gas case could lead investors to seek multiple fatwas, or religious rulings, endorsing a sukuk.
The case is being disputed in Britain and the UAE because the purchase undertaking for the sukuk is governed by English law, while the gas production assets behind the sukuk fall under UAE law.
London’s High Court is due to hold a full hearing in September on efforts by Dana to restructure the $700 million bond, while a court hearing in Sharjah is scheduled for Dec. 25.
Dana, which is based in Sharjah, started legal proceedings in the emirate last month to seek a declaration on the lawfulness of the sukuk. In mid-June it obtained an injunction from London’s High Court blocking the holders of the bonds from taking action against the company.
Deutsche Bank, on behalf of the sukuk holders, last week asked Dana for $14 million as a sukuk profit payment for the period ending on July 31 — a request that the energy producer refused on the grounds that the sukuk are unlawful.


Dubai property developer Damac on hunt for land in Saudi Arabia

Hussain Sajwani
Updated 18 March 2019
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Dubai property developer Damac on hunt for land in Saudi Arabia

  • Brexit a “concern” for UK property market says Sajwani
  • Developer mulls investing “up to £500 million” on London project

LONDON: The Dubai-listed developer Damac says it is scouting for additional plots of land in Saudi Arabia, both in established cities and the Kingdom’s emerging giga-projects such as Neom.
Hussain Sajwani, chairman of Damac Properties, also said the company would look to invest up to £500 million ($660 million) on a second development in the UK, and that it is on track to deliver a record 7,000 or more units this year.
Amid a slowing property market in Dubai, Damac’s base, the developer is eying Saudi Arabia as a potential ground for expansion for its high-spec residential projects.
Damac has one development in Jeddah, and a twin-tower project in Riyadh — and Sajwani said it is looking for additional plots in the Kingdom.
“It’s a big market. It is changing, it is opening up, so we see a potential there … We are looking,” he said.
“In the Middle East, Saudi Arabia is the biggest economy … They have some very ambitious projects, like the Neom city and other large projects. We’re watching those and studying them very carefully.”
The $500 billion Neom project, which was announced in 2017, is set to be a huge economic zone with residential, commercial and tourist facilities on the Red Sea coast.
Sajwani said doing business in Saudi Arabia was “a bit more difficult or complicated” that the UAE, but said the country is opening up, citing moves to allow women to drive and reopen cinemas.
He was speaking to Arab News in Damac’s London sales office, opposite the Harrods department store in Knightsbridge. The office, kitted out in plush Versace furnishings, is selling units at Damac’s first development in the UK, the Damac Tower Nine Elms London.
The 50-storey development is in a new urban district south of the River Thames, which is also home to the US Embassy and the famous Battersea Power Station, which is being redeveloped as a residential and commercial property.
Work on Damac's tower is underway and is due to complete in late 2020 or early 2021, Sajwani said.
“We have sold more than 60 percent of the project,” he said. “It’s very mixed, we have (buyers) from the UK, from Asia, the Middle East.”
Damac’s first London project was launched in 2015, the year before the referendum on the UK exiting the EU — the result of which has had a knock-on effect on the London property market.
“Definitely Brexit has cause a lot of concern, people are not clear where the situation will go. Overall, the market has suffered because of Brexit,” Sajwani said.
“It’s going to be difficult for the coming two years at least … unless (the UK decides) to stay in the EU.”
Despite the ongoing uncertainty over Brexit, Sajwani said Damac was looking for additional plots of land in London, both in the “golden triangle” — the pricey areas of Mayfair, Belgravia and Knightsbridge, which are popular with Gulf investors — and new residential districts like Nine Elms.
Sajwani is considering an investment of “up to £500 million” on a new project in the UK capital.
“We are looking aggressively, and spending a lot of time … finding other opportunities,” he said. “Our appetite for London is there.”
Damac is also considering other international property markets for expansion, including parts of Europe and North American cities like Toronto, Boston, New York and Miami, Sajwani said.
The international drive by Damac comes, however, amid a tough property market in the developer’s home market of Dubai.
Damac in February reported that its 2018 profits fell by nearly 60 percent, with its fourth-quarter profit tumbling by 87 percent, according to Reuters calculations.
Sajwani — whose company attracted headlines for its partnership with the Trump Organization for two golf courses in Dubai — does not see any immediate recovery in the emirate’s property market, or Damac’s financial results.
“(With) the market being soft, prices being under pressure, we are part of the market — we are not going to do better than last year,” he said. “This year and next year are going to be difficult years. But it’s a great opportunity for the buyers.”
But the developer said Dubai was “very strong fundamentally,” citing factors like its advanced infrastructure, safety and security, and low taxes.
In 2018, Damac delivered over 4,100 units — a record for the company — and this year, despite the difficult market, it plans to hand over even more.
“We’re expecting north of 7,000,” Sajwani said. “This year will be another record.”