Dana Gas wins over creditors for sukuk restructuring plans

worker and offshore rig background
Updated 05 June 2018

Dana Gas wins over creditors for sukuk restructuring plans

LONDON: The Abu Dhabi-listed Dana Gas has won the support of its creditors to push forward with plans to restructure its $700 million sukuk after a lengthy legal battle.
The Sharjah-based energy company has managed to secure 93.69 percent approval for the proposed restructuring terms, according to a filing on the Abu Dhabi bourse on Tuesday.
It only required 75 percent approval to go ahead with its proposal.
“We are extremely pleased to have received consent from an overwhelming majority of sukuk certificate holders, thus confirming the company’s belief that the proposed terms of the deal (were) fair and in the best interests of all,” said Patrick Allman-Ward, CEO of Dana Gas.
Dana Gas — which has exploration and production assets in Egypt, the Kurdistan region of Iraq and the UAE — first called for the restructuring of its debt last May, citing “continued challenges” around cash collections and a need “to focus on short to medium-term cash preservation.”
It went on to shock the market a month later by announcing its sukuk was no longer Shariah-compliant under UAE law.
This meant, the company argued, it wasn’t required to repay its debt under the existing structure.
Creditors — who include BlackRock, the world’s largest asset managers — launched legal action against Dana Gas in a case that had the potential to undermine confidence in the use of Islamic finance instruments in the region.
Dana Gas outlined its current restructuring proposal to creditors last month, and won the agreement of an ad-hoc committee of sukukholders.
Debt holders were offered the option to exit their principal investment by tendering their claims at 90.5 cents per US dollar of the face value of their holdings.
Or, if they chose not to exit, the new sukuk certificates would have a 4 percent profit rate and 3-year tenor.
As part of the restructuring agreement, members of the ad-hoc committee of sukuk holders entered into an agreement with Dana Gas for the dismissal of all pending litigation and the release of certain claims.
Dana had previously put forward a restructuring proposal in February this year which was rejected by creditors, according to Reuters reports.
This time, the company’s proposal won 90.93 percent approval from holders of the 9 percent ordinary sukuk certificate holders and 96.45 percent approval from holders of the 7 percent exchangeable sukukholders.
A general meeting of the debt holders will be held on June 13 to finalize the restructuring plan, the company said.
Dana Gas’s financial position has improved over the last year, with the firm reporting net profit of $14 million in the first quarter of 2018, an increase of 27 percent year-on-year.
The company said that it was collecting payments regularly, particularly from the Kurdistan Region of Iraq, which has helped bolster its cash reserves to $636 million.
Revenues reached $120 million in Q1 compared to $118 million in the same time period last year. Higher condensate prices helped to support revenue growth and offset a fall in production in Egypt and the UAE.

Gulf defense spending ‘to top $110bn by 2023’

Updated 15 February 2019

Gulf defense spending ‘to top $110bn by 2023’

  • Saudi Arabia and UAE initiatives ‘driving forward industrial defense capabilities’
  • Budgets are increasing as countries pursue modernization of equipment and expansion of their current capabilities

LONDON: Defense spending by Gulf Arab states is expected to rise to more than $110 billion by 2023, driven partly by localized military initiatives by Saudi Arabia and the UAE, a report has found.

Budgets are increasing as countries pursue the modernization of equipment and expansion of their current capabilities, according to a report by analytics firm Jane’s by IHS Markit.

Military expenditure in the Gulf will increase from $82.33 billion in 2013 to an estimated $103.01 billion in 2019, and is forecast to continue trending upward to $110.86 billion in 2023.

“Falling energy revenues between 2014 and 2016 led to some major procurement projects being delayed as governments reigned in budget deficits,” said Charles Forrester, senior defense industry analyst at Jane’s.

“However, defense was generally protected from the worst of the spending cuts due to regional security concerns and budgets are now growing again.”

Major deals in the region have included Eurofighter Typhoon purchases by countries including Saudi Arabia and Kuwait.

Saudi Arabia is also looking to “localize” 50 percent of total government military spending in the Kingdom by 2030, and in 2017 announced the launch of the state-owned military industrial company Saudi Arabia Military Industries.

Forrester said such moves will boost the ability for Gulf countries to start exporting, rather than purely importing defense equipment.

“Within the defense sector, the establishment of Saudi Arabia Military Industries (SAMI) in 2017 and consolidation of the UAE’s defense industrial base through the creation of Emirates Defense Industries Company (EDIC) in 2014 have helped consolidate and drive forward industrial defense capabilities,” he said.

“This has happened as the countries focus on improving the quality of the defense technological work packages they undertake through offset, as well as increasing their ability to begin exporting defense equipment.”

Regional countries are also considering the use of “disruptive technologies” such as artificial intelligence in defense, Forrester said.

Meanwhile, it emerged on Friday that worldwide outlays on weapons and defense rose 1.8 percent to more than $1.67 trillion in 2018.

The US was responsible for almost half that increase, according to “The Military Balance” report released at the Munich Security Conference and quoted by Reuters.

Western powers were concerned about Russia’s upgrades of air bases and air defense systems in Crimea, the report said, but added that “China perhaps represents even more of a challenge, as it introduces yet more advanced military systems and is engaged in a strategy to improve its forces’ ability to operate at distance from the homeland.”