Dana Gas said on Wednesday it would begin discussions to restructure its US$700 million Islamic bond maturing in October to shore up capital, although it may come at a higher price.
The Sharjah-based company has been plagued by outstanding arrears from Egypt and the Kurdish region of Iraq, amounting to nearly $1 billion. In a filing on the Abu Dhabi bourse, the company said that it must focus on capital for the short to medium term.
Dana Gas said it was addressing the way forward on the sukuk “in a practical manner that balances the interests of all stakeholders” with remaining profit payments addressed as part of the solution.
Dana Gas has invited sukuk holders to form a committee to represent them.
“Restructuring in the upcoming round is likely to be more costly for Dana Gas in terms of the coupon and pricing,” said Sanyalak Manibhandu, head of research at NBAD Securities.
The company has been talking about rolling over the sukuk for several quarters as it continues to struggle to reduce trade accounts receivables. In its third-quarter earnings, Dana Gas said that the recovery rate in Egypt was only 64 per cent of billings, which was the lowest in five years.
Mr Manibhandu added: “The problem for shareholders is the fact that Dana Gas completed restructuring in early 2013 with respect to the $1bn sukuk that matured in October 2012.”
However, he said that there could be some relief from production performance and settlement with trade debtors and the National Iranian Oil Company (NIOC) later this year.
NIOC signed a 25-year deal in 2001 to supply Crescent, which owns 21 per cent of Dana Gas, with 600 million cubic feet a day of gas by pipeline. The deal never materialised, prompting Crescent and Dana Gas to seek an arbitration case, which has been ongoing with the final ruling from The Hague expected this year.
Allen Sandeep, director of research at Cairo-based Naeem Brokerage, said that he expected the sukuk’s principal repayment would probably be extended by another five years. “However, it will be interesting to see the revised terms which could be subject to changes and amendments,” he said, referring to profit rates and partial principal payments, among others.
Dana Gas said that it had also made other efforts to reduce costs to combat the low collection levels with a 43 per cent reduction in costs and a 7 per cent decrease in operational spending last year.
The company ended on a flat note in trading yesterday, closing at 44 fils in Abu Dhabi.
lgraves@thenational.ae
