Sharjah-based Dana Gas sought to have US$700 million worth of Islamic bonds declared unlawful so it could avoid repaying investors next month, London’s High Court heard on Monday, a charge the company has denied.
The company’s claim that a huge 2013 financing deal was invalid owing to subsequent changes in Islamic financial practice was “absurd”, according to documents filed by bondholders with the court.
The bondholder group, led by Blackrock, the world’s largest asset manager, was in court on Monday demanding that Dana Gas repays millions of pounds, or hand over stock in a subsidiary that runs its operations in Egypt.
It also wanted the court to ban Dana Gas from issuing any new sukuk to secure further funds for the company. Dana Gas stunned the Islamic finance community in June by declaring the $700m sukuk Sharia non-compliant just four months before it was due to repay bond-holders.
The courtroom battle is notable for the absence of Dana Gas, which has been prevented from taking part because of an injunction in the UAE.
Lawyers for Blackrock claim that the injunction had been a deliberate attempt by the company to frustrate the court hearing, but a high court judge ruled last week that the trial in London would go ahead as planned.
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The complex case is being keenly watched by the Islamic finance industry, with both London and the UAE seeking to position themselves as world leaders within the sector.
“Obviously if there is an adverse judgement out of the London court it will raise a lot of questions particularly in the minds of non-Sharia investors and there are a fair amount of non-Sharia investors who invest in sukuk,” said Abdul Kadir Hussain, the head of fixed-income asset management in Dubai at Arqaam Capital, which holds some of the Dana Gas sukuk.
Any prospect of an early conclusion to the case has been disputed by Dana Gas, which has claimed that litigation could continue in the UAE whatever the ruling in London and could last up to ten years, according to court documents.
“While markets have short memories, I think this case has already negatively impacted international investor appetite for Sukuk - most likely in the corporate (Vs bank and sovereign) sector,” said Khalid Howladar, the managing director of the risk and ratings Islamic finance advisory Acreditus.
“The complexity of the sukuk industry was already an inhibitor to growth and these recent events will cause some investors to avoid the sector completely and drive up the profit rates demanded by remaining investors. Regulatory intervention is needed to restore confidence.”
Dana Gas secured $850m from international investors in May 2013 via the restructuring of an earlier $1 billion deal secured that had been due to mature in 2012. The company was unable to repay that deal because of payment delays from operations in Egypt and the Kurdish region of Iraq.
“If all had gone well, the value … would be sufficiently large that the investments would be liquidated for an amount that was at least as large” as the money invested, said Richard Handyside QC, for the BlackRock-led group of investors, which also includes investment bank Goldman Sachs.
Dana Gas made quarterly payments according to the terms of the agreement until April 2017, but announced in May that it would embark on new restructuring talks with sukuk holders because of continued cash collection problems.
The following month, it sought a court order in Sharjah arguing that it should no longer make payments because Islamic finance standards had changed making them unlawful under UAE law. The company also took legal action in the UK and the British Virgin Islands, where its Egypt subsidiary was registered, to prevent further payments to investors.
It was clear that Dana Gas’s challenge to the lawfulness of the agreement struck between the company and investors was “in order to avoid its obligations upon maturity of the sukuk” on October 31, according to court papers.
It said claims by an expert witness on UAE law for the company that the investors had deliberately sought to introduce illegal elements to the agreement was “nonsense”.
The company – which had redeemed $150m of the sukuk - outlined a new four-year plan on “materially worse” terms to the investors, according to the documents on behalf of the investors.
On an investor call in July, Dana Gas chief executive Patrick Allman-Ward said that the new terms reflect material changes in the global high yield environment since 2012, the company’s improved credit position, and increased gas production.
The complexity of the case is linked to the multiplicity of contracts signed in both UK and UAE jurisdiction before the company secured the $850m investment. The company contends that it received legal advice that made part of the sukuk illegal under the laws of the UAE, bringing down the whole deal.
The investors claimed that part of the agreement was struck under UK corporate law, to ensure that their payments would be protected in the event of a change in Islamic financial practice. It claimed that the agreement was “lawful and enforceable under UAE law” and the company had to pay up.
“Issues of UAE law… are not the central issues in this trial,” the document said. The trial, which is expected to last up to two weeks, is due to hear evidence from the former general counsel of Dana Gas.
Various Artists
Habibi Funk: An Eclectic Selection Of Music From The Arab World (Habibi Funk)
Key recommendations
- Fewer criminals put behind bars and more to serve sentences in the community, with short sentences scrapped and many inmates released earlier.
- Greater use of curfews and exclusion zones to deliver tougher supervision than ever on criminals.
- Explore wider powers for judges to punish offenders by blocking them from attending football matches, banning them from driving or travelling abroad through an expansion of ‘ancillary orders’.
- More Intensive Supervision Courts to tackle the root causes of crime such as alcohol and drug abuse – forcing repeat offenders to take part in tough treatment programmes or face prison.
Brief scores:
QPR 0
Watford 1
Capoue 45' 1
How to invest in gold
Investors can tap into the gold price by purchasing physical jewellery, coins and even gold bars, but these need to be stored safely and possibly insured.
A cheaper and more straightforward way to benefit from gold price growth is to buy an exchange-traded fund (ETF).
Most advisers suggest sticking to “physical” ETFs. These hold actual gold bullion, bars and coins in a vault on investors’ behalf. Others do not hold gold but use derivatives to track the price instead, adding an extra layer of risk. The two biggest physical gold ETFs are SPDR Gold Trust and iShares Gold Trust.
Another way to invest in gold’s success is to buy gold mining stocks, but Mr Gravier says this brings added risks and can be more volatile. “They have a serious downside potential should the price consolidate.”
Mr Kyprianou says gold and gold miners are two different asset classes. “One is a commodity and the other is a company stock, which means they behave differently.”
Mining companies are a business, susceptible to other market forces, such as worker availability, health and safety, strikes, debt levels, and so on. “These have nothing to do with gold at all. It means that some companies will survive, others won’t.”
By contrast, when gold is mined, it just sits in a vault. “It doesn’t even rust, which means it retains its value,” Mr Kyprianou says.
You may already have exposure to gold miners in your portfolio, say, through an international ETF or actively managed mutual fund.
You could spread this risk with an actively managed fund that invests in a spread of gold miners, with the best known being BlackRock Gold & General. It is up an incredible 55 per cent over the past year, and 240 per cent over five years. As always, past performance is no guide to the future.
Women%E2%80%99s%20T20%20World%20Cup%20Qualifier
%3Cp%3E%3Cstrong%3EUAE%20fixtures%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3E25%20April%20%E2%80%93%20Ireland%20v%20UAE*%3Cbr%3E27%20April%20%E2%80%93%20UAE%20v%20Zimbabwe**%3Cbr%3E29%20April%20%E2%80%93%20Netherlands%20v%20UAE*%3Cbr%3E3%20May%20%E2%80%93%20UAE%20v%20Vanuatu*%3Cbr%3E5%20May%20%E2%80%93%20Semi-finals%3Cbr%3E7%20May%20%E2%80%93%20Final%3Cbr%3E%3Cstrong%3EUAE%20squad%3A%20%3C%2Fstrong%3EEsha%20Oza%20(captain)%2C%20Al%20Maseera%20Jahangir%2C%20Avanee%20Patel%2C%20Heena%20Hotchandani%2C%20Indhuja%20Nandakumar%2C%20Kavisha%20Kumari%2C%20Khushi%20Sharma%2C%20Lavanya%20Keny%2C%20Mehak%20Thakur%2C%20Rinitha%20Rajith%2C%20Samaira%20Dharnidharka%2C%20Siya%20Gokhale%2C%20Suraksha%20Kotte%2C%20Theertha%20Satish%2C%20Vaishnave%20Mahesh.%3C%2Fp%3E%0A%3Cp%3E*Zayed%20Cricket%20Stadium%3C%2Fp%3E%0A%3Cp%3E**Tolerance%20Oval%3C%2Fp%3E%0A
Picture of Joumblatt and Hariri breaking bread sets Twitter alight
Mr Joumblatt’s pessimism regarding the Lebanese political situation didn’t stop him from enjoying a cheerful dinner on Tuesday with several politicians including Mr Hariri.
Caretaker Culture Minister Ghattas Khoury tweeted a picture of the group sitting around a table at a discrete fish restaurant in Beirut’s upscale Sodeco area.
Mr Joumblatt told The National that the fish served at Kelly’s Fish lounge had been very good.
“They really enjoyed their time”, remembers the restaurant owner. “Mr Hariri was taking selfies with everybody”.
Mr Hariri and Mr Joumblatt often have dinner together to discuss recent political developments.
Mr Joumblatt was a close ally of Mr Hariri’s assassinated father, former prime minister Rafik Hariri. The pair were leading figures in the political grouping against the 15-year Syrian occupation of Lebanon that ended after mass protests in 2005 in the wake of Rafik Hariri’s murder. After the younger Hariri took over his father’s mantle in 2004, the relationship with Mr Joumblatt endured.
However, the pair have not always been so close. In the run-up to the election last year, Messrs Hariri and Joumblatt went months without speaking over an argument regarding the new proportional electoral law to be used for the first time. Mr Joumblatt worried that a proportional system, which Mr Hariri backed, would see the influence of his small sect diminished.
With so much of Lebanese politics agreed in late-night meetings behind closed doors, the media and pundits put significant weight on how regularly, where and with who senior politicians meet.
In the picture, alongside Messrs Khoury and Hariri were Mr Joumbatt and his wife Nora, PSP politician Wael Abou Faour and Egyptian ambassador to Lebanon Nazih el Nagari.
The picture of the dinner led to a flurry of excitement on Twitter that it signified an imminent government formation. “God willing, white smoke will rise soon and Walid Beik [a nickname for Walid Joumblatt] will accept to give up the minister of industry”, one user replied to the tweet. “Blessings to you…We would like you to form a cabinet”, wrote another.
The next few days will be crucial in determining whether these wishes come true.
Results
5pm: Maiden (PA) Dh80,000 (Turf) 2,200m, Winner: Zalman, Pat Cosgrave (jockey), Helal Al Alawi (trainer)
5.30pm: Maiden (PA) Dh80,000 (T) 1,600m, Winner: Hisham Al Khalediah II, Fernando Jara, Mohamed Daggash.
6pm: Handicap (PA) Dh85,000 (T) 1,600m, Winner: Qader, Adrie de Vries, Jean de Roualle
6.30pm: Abu Dhabi Championship Listed (PA) Dh180,000 (T) 1,600m, Winner: Mujeeb, Fabrice Veron, Eric Lemartinel
7pm: Wathba Stallions Cup Handicap (PA) Dh70,000 (T) 1,600m, Winner: AF Majalis, Tadhg O’Shea, Ernst Oertel
7.30pm: Handicap (TB) Dh90,000 (T) 1,600m, Winner: Shanaghai City, Fabrice Veron, Rashed Bouresly
8pm: Handicap (TB) Dh100,000 (T) 1,400m, Winner: Nayslayer, Bernardo Pinheiro, Jaber Ramadhan
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills