Weeks of talks ‘fail to resolve Dana Gas sukuk dispute’

The Dana Gas case moved to UAE and British courts, where legal proceedings are continuing. (Reuters)
Updated 17 January 2018
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Weeks of talks ‘fail to resolve Dana Gas sukuk dispute’

DUBAI: Weeks of talks between UAE energy firm Dana Gas and some local holders of a disputed $700 million sukuk have failed to reach an agreement, sources told Reuters, leaving a potentially protracted legal battle as the only available option for now.
Last year, Dana refused to redeem $700 million of maturing Islamic bonds, arguing they were no longer valid under UAE law because of changes in Islamic financial practice over the last several years.
The move shocked the global Islamic finance industry, as some investors worried it could set a precedent for other sukuk issuers who might refuse to repay their obligations on the grounds of religious permissibility.
Dana proposed in June last year to swap its sukuk, held by international investors such as BlackRock as well as UAE investors, with new sharia-compliant bonds, but creditors rejected the proposal, saying the terms were unfavorable.
The case moved to UAE and British courts. Legal proceedings in both countries are continuing, but in November a British court ruled in favor of Dana’s creditors.
In the past few weeks Dana’s financial adviser in the dispute, US firm Houlihan Lokey, has been in talks with some of Dana’s UAE creditors to seek a potential out-of-court solution, several sources familiar with the matter said.
The UAE creditors, represented by Dubai-based Arqaam Capital, include National Bonds Corp., an investment company specializing in sharia-compliant financial products. National Bonds is owned by Investment Corp. of Dubai, an investment arm of the Dubai government.
National Bonds did not respond to a request for comment. Dana and a committee representing major international sukuk holders declined to comment.
Arun Reddy, a managing director at Houlihan Lokey, said: “Dana Gas’ financial adviser has been approached by various local and international creditors over this process. It’s clear from those discussions that creditors, including local creditors, prefer a consensual against a litigation-driven outcome.”
A legal source familiar with the matter said Dana held talks with UAE creditors because “there has always been the view that local creditors were more open than their international counterparts” to a settlement.
Moelis, the firm advising the creditors’ committee, was made aware of the discussions, the sources said.
The talks revolved around Dana’s original restructuring proposal from last June and no new, formal proposal was advanced, which is why they have not led to any meaningful result, the sources said, declining to be named because of commercial sensitivities.
“Discussions were about interest rates, amortizations, conversion rates, but Houlihan didn’t appear to have a mandate to negotiate on these sticky points conclusively,” said one of the sources.
According to two sources, since the talks were not leading anywhere, Moelis decided last week not to engage in them. A third source said, however, that local creditors were not aware of such a decision. Moelis declined to comment.
The lack of a resolution means that going through the courts — which could take many more months or even years, people familiar with the matter have said — may be the only option available, at least for the time being.
New proceedings are scheduled to take place in a British court this month to address issues such as injunctions, obtained in previous phases of the case, that prevent creditors from enforcing claims and limit Dana’s ability to pursue legal action in a court in Sharjah, where the company is headquartered.
“There are still legal mechanisms that the company can use, so the company is still acting as if they have legal ground to put themselves in a better negotiating position,” one creditor said.
— REUTERS


Russian big gun rolls out latest hardware for Gulf customers

Updated 18 February 2019
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Russian big gun rolls out latest hardware for Gulf customers

LONDON: As the region’s biggest military exhibition gets underway in Abu Dhabi, Sergey Chemezov, CEO of Russian defense conglomerate Rostec, spoke exclusively to Arab News about the company’s regional ambitions.
What is the expected value of your exports this year? 
The order portfolio of Rosoboronexport, Rostec’s subsidiary, currently exceeds $50 billion. Russia is the second-largest arms supplier in the world.
In 2018, arms and military machinery were supplied to over 40 countries worldwide. In addition, we signed more than 1,100 contractual documents to an amount of over $20 billion, which is nearly one-quarter more than in 2017. 
The Middle East and North Africa accounted for almost half of Rosoboronexport’s supplies of military products, more than 40 percent. Only two years before, that share had been significantly smaller, about 20 percent. That trend says it all; military and technical cooperation with the countries of that region have been strengthening. The Middle East is currently the leading region in the world by the volume of arms purchased, accounting for nearly one-third of the total market. Middle Eastern states (Saudi Arabia, Israel, Egypt, the UAE and Qatar) make half of the list of 10 major importers of military products, and Saudi Arabia remains the top importer. 
Which country will most likely become your largest client in the Middle East in 2019? Which systems is Rostec planning to sell in the region this year?
We’re implementing a range of projects in the UAE, both in civil and military areas. Russia is also interested in developing military and technical cooperation with all countries of the region. In recent years, we’ve resumed close contacts with a whole range of states, including Iraq.
I’d like to particularly focus on the Yak-130 combat trainer aircraft. The countries of the region are showing a continuously increasing interest in combat trainers. The Yak-300 has all the necessary characteristics required for aircraft of that type, and I firmly believe that it has great potential for supplies to the countries of the region.
What are the potential consequences of the suspension of the New START Treaty with the US? Is it affecting Rostec’s production plans? 
As a person who cares about what’s happening in the world, I can say that I’m worried by the position of the US. It is leading to a new arms race and aggravating international tension. The Russian Army is well equipped, and is capable of efficiently responding to attacks. Our corporation has done its best for this purpose. Yet there will be no winners in a third world war if it happens. 
Is there up-to-date information on supplies of S-400 systems to Turkey?
The contract for the S-400 was signed in 2017. We’ve agreed to reduce the terms already twice, and in autumn 2019 the obligations will be fulfilled. Of course, Turkey does have ambitions to develop its national defense industry, and in this regard, it has already achieved significant progress in a range of areas. Therefore, our partners are interested in such topics as joint development of machinery, including such advanced equipment as air defense systems.
As to joint production, the contract for the S-400 provides for an option. This is about cooperation in technology. We’re ready to agree to localization of manufacture of certain elements of that system. I’ve said it earlier and will repeat it again: The S-400 is a defense system, not an offensive one. We can sell it to the Americans if they want it. Thus, strategically there are no problems in this regard. And I can see no problems for Russia in terms of security.
Is Rostec discussing any potential sales with Saudi Arabia, and if yes, in which area?
The military sector prefers silence, therefore I wouldn’t go into detail. I’d only say that we’re actively working in a range of areas. We can confirm information about signing a number of contracts with Saudi Arabia, as well as about both parties’ readiness to fulfill them, including on the S-400. Talking of the civil area, Rostec possesses a whole range of innovative technologies that can be demanded within implementation of the ambitious NEOM city project. These are water treatment systems, electronic services, various solutions in the area of composite materials, glazing with special features, as well as advanced technologies and innovations for manufacturing biodegradable polymers and products based on natural renewable raw materials. 
Do you have up-to-date information on progress in the privatization of Rostec’s holdings?
The sale of shares isn’t an end in itself for Rostec, but rather a tool for developing its assets in compliance with the corporation’s development strategy until 2025. We’re interested not only in attracting additional investments, but also in gaining new competences, technologies and markets. Private-public partnerships help our enterprises, and holdings become more efficient and take new positions quicker. 
What are your expectations of the corporation’s profit for the year?
We’re finishing assessment of the results, and will officially announce them in the near future. Now I can say that the company continues to show good financial results, and we expect an increase in both revenue and net profit compared to 2017.
Do you expect that long-standing low oil prices will affect regional sales this year?
The example of Russia shows that oil prices do not determine everything. Even when they are low, the economy can develop. 
We sense that the countries of the region have already adapted to the new price realities that dramatically appeared in 2014. At the same time, interest in our products, both military and civilian, in the region is growing from year to year.
What products will Rostec holding companies present at IDEX 2019?
The IDEX exhibition is one of the world’s largest venues where Russia demonstrates its latest developments in the field of weapons and military equipment. This is an opportunity for us to negotiate and discuss cooperation with our traditional partners, primarily from the Middle East, which is of particular interest to Russian industry. After all, the Middle East and North Africa account for almost half of the sales of Russian military products abroad. The joint exposition of Russian enterprises at IDEX, which occupies more than 1,100 square meters of exhibition area, will feature about 1,000 samples of military products.
In particular, the unparalleled Pantsir-ME, an air defense missile and artillery system, will make its international debut at the exhibition, presented by the High-Precision Complexes Holding. The system is able to protect ships from all types of aerial kill assets.
A large-caliber automatic assault rifle complex, the SHAK-12, designed for close combat, will also be shown there. Units of Russian special services are armed with these complexes.
Kalashnikov Concern will showcase a wide range of small arms and hunting weapons. The AK-15 and 200 series Kalashnikov certified for export will be shown abroad for the first time. The 200 series assault rifles will be one of the key Russian novelties at IDEX 2019. 
Tecmash Concern will exhibit a number of its latest ammunition products. These include a 122-mm unmanned rocket missile with a detachable blast fragmentation warhead for the Tornado-G multiple-launching rocket system. This ammunition has much greater kill effectiveness than issued shells of the Grad system. At the same stand, visitors will for the first time see a unique video showing how the Tornado-G works. In addition, at the show the world community will for the first time see Tecmash’s AZ-TSR-47, an increased-efficiency jet-stabilized projectile designed to protect surface ships from weapons equipped with radar guidance systems.
TSNIITOCHMASH will present at IDEX its already well-known second-generation Ratnik combat equipment, which is exactly what is now supplied to the Russian Army. Ratnik in the color of sand, presented at IDEX, has been successfully tested in Syria. Its components include a body armor backed with a special armor panel. This panel can withstand 10 hits of SVD sniper rifle armor-piercing incendiary bullets, fired from a distance of 10 meters, and the plate is not deformed on the back, providing protection against contusion damage. The Russian bulletproof vest also wins in terms of weight: It is 2.5-3 kg less compared to the US general military bulletproof vest.
Each exhibition held in the Middle East demonstrates that the corporation has immense potential to cooperate with the countries of the region.