Dana Gas has appealed directly to its sukuk holders in a bid to resolve a cash flow crisis without having to pursue a solution through the courts.
The Sharjah-based gas operator, that is 19 per cent owned by Crescent Petroleum, is inviting the holders of US$700 million of sukuk to join a conference call this Wednesday where the management will explain its proposal for restructuring its financing.
“The purpose of the call is to communicate directly with the company’s broad sukuk holder group and provide proper context and additional information regarding the planned restructuring, including background on declaration of the current Sukuk’s unlawfulness ; [and action] to protect its position in the interests of all of its stakeholders,” the company said in a statement.
The company’s move follows a rejection by representatives of an ad hoc committee of sukuk holders who accuse Dana Gas of a “litigation ambush” after it secured a ruling from a Sharjah court that particular terms of its two outstanding sukuk were not Shariah-compliant.
The company has subsequently secured court injuctions in three jurisdictions: Sharjah, the British Virgin Isles, which is the domicile of the company holding its Egypt assets, and England, which is the legal jurisdiction that covers the main terms of the sukuk.
“This is not the way to start a restructuring negotiation. It is a blatant attempt to bully the certificate holders,” said Andrew Wilkinson, a lawyer at Gotshal, Weil and Manges, one of the firms representing the ad hoc committee. “The call on Wednesday looks part of the same tactic, we note there is no provision for a Q&A.”
Dana Gas has run into cashflow problems because the governments of Egypt and the Kurdish region of Iraq, where its two main assets are located, have built up huge arrears and have been slow and erratic in making back-payments.
The two sukuk – for $350m each – are due in October and the company does not have enough cash on hand to meet its obligations. Company officials have said previously the pre-emptive legal action was aimed at avoiding a repeat of a similar debt restructuring in 2013 when bondholders declared technical default and extracted terms that Dana Gas says has subsequently put the company in a precarious financial situation.
Dana Gas says the ad hoc committee has rejected attempts to start talks, while committee representatives say the legal action pre-empted any talks and that it won’t accept diminished payment terms.
amcauley@thenational.ae
