UAE’s Dana Gas agrees with creditors on $700 mln sukuk restructuring

Updated 13 May 2018

UAE’s Dana Gas agrees with creditors on $700 mln sukuk restructuring

DUBAI: Energy producer Dana Gas reached agreement with creditors on restructuring $700 million of sukuk, the firm said on Sunday, potentially ending a protracted legal battle that unsettled the global Islamic finance industry.
The United Arab Emirates firm said in June it would not redeem the Islamic bonds, arguing that changes in Islamic financial practice since they were issued made them invalid under UAE law. This led to months of negotiations and a fight in UAE and British courts.
Under the deal with the sukuk holders’ committee, investors who want to exit the instruments will be able to do so at 90.5 cents on the dollar, which includes a bonus of 2.5 cents if they accept within seven days of the start of the tender offer.
Alternatively, investors will be able to exchange the sukuk into new three-year Islamic instruments with a 4 percent profit rate, while receiving final profit payments that they were owed before the old sukuk matured last Oct. 31.
“The consensual transaction represents a means to resolve amicably all current issues and disputes facing the parties,” Dana said in a statement.
The company said it expected to launch the tender offer this month and complete the deal by the first half of July — though this depended on conditions including payment of costs of certain parties, termination of all current litigation, and the release of certain claims being met.
Holders representing over 52 percent of $350 million of sukuk that were convertible into equity, and over 30 percent of $350 million of non-convertible sukuk, agreed to take no further action before the tender offer, Dana said.
Its shares jumped 4.8 percent in early trade on Sunday in response to news of the deal, which it said could cut its debt by up to $385 million.


Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

Updated 30 min 50 sec ago

Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

SINGAPORE: Cathay Pacific Airways has shelved plans for its first US dollar debt deal in 23 years, the airline said on Friday, after sources told Reuters that global investors had questioned the pricing due to civil unrest in Hong Kong.

The airline, the biggest corporate casualty of widespread anti-government protests in the Asian financial hub, on Friday lowered its second-half profit expectations, citing “incredibly challenging” conditions in its home market.

Cathay had started meeting investors in Hong Kong and Singapore on Sept. 24 after it mandated four banks to explore carrying out a US dollar denominated bond, according to a term sheet issued at the time, seen by Reuters.

It would have been the first US dollar debt deal for Cathay since 1996 and had been touted as a landmark transaction for the airline given all of its debt is denominated in Hong Kong dollars.

The issuance was to be unrated, and two sources with knowledge of the matter said that Cathay was willing to pay 200 basis points over the US Treasuries rate to secure three-year or five-year funding, with the size and term of the placement dependent on demand.

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Cathay has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

However, investors demanded a higher price of at least 300 basis points over US Treasuries, which made the deal more expensive for Cathay, said the sources, who were not authorized to speak publicly about the matter. Cathay’s term sheet had said the transaction would be reliant on market conditions. A Cathay spokesman on Friday said the Hong Kong dollar private placement market was providing more funding opportunities and a debt issuance in that market was completed last month. “We will continue to monitor the US dollar bond market in future,” he said in a statement.

Dealogic data showed that Cathay raised $102 million in October and $64 million in May through Hong Kong dollar denominated deals.

The airline has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

Cathay had mandated Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank and HSBC to work on the shelved US dollar bond deal.