Dana Gas buys back $133m of sukuk as part of restructuring agreement

The outstanding Sharia-compliant bond of the company now stands at $397m

Dana Gas' sukuk holders include US asset managers Black Rock and Goldman Sachs Group. Jaime Puebla / The National

Sharjah energy company Dana Gas bought back $133 million (Dh488.4m) of its outstanding sukuk, fulfilling the restructure commitment of its Islamic bonds.

The buyback of Dana Gas’s Nile Delta Sukuk reduced the size of outstanding Sharia-compliant bonds to $397m from $530m, and has enabled the company to achieve an average price of 92.1 cents, according to a regulatory filing on Sunday to Abu Dhabi Securities Exchange, where the company's shares are traded.

“The company has now satisfied the commitment to buyback circa $100m of sukuk following the consensual restructuring of the sukuk in 2018, and has also met the threshold amount of outstanding sukuk,” Dana Gas said. “It allows the company to continue to pay the sukuk profit rate at 4 per cent per annum rather than increase to 6 per cent per annum.”

Dana Gas secured an agreement to restructure and refinance the company’s $700m sukuk, which had been the subject of a protracted legal dispute since 2017, when it surprised creditors including investment bank Goldman Sachs and the world’s largest asset manager BlackRock by declaring its bonds non-Sharia-compliant.

The company had cited changes in Islamic finance as the reason for the change in legal status of its outstanding sukuk and argued it was therefore not obliged to repay the debt.

Under the agreement reached in May 2018, sukukholders had the opportunity to immediately cash in their claims at 90.5 cents per dollar of the face value of their holdings, or receive a partial pay down and exchange the rest into a new sukuk instrument with a deferred payment structure.

The company will save $21m by buying back the total of $133m of its sukuk in the market below par and by future profit rates savings on sukuk that were bought back. By maintaining the profit rate at 4 per cent per annum, Dana Gas will make a further saving of $8m, increasing the savings to a total of $29m, in addition to $35m a year saving “achieved at the time of the restructuring”.

“The company will continue to act opportunistically with regard to further sukuk buyback,” Dana Gas said.

The company’s board has also approved a proposal, seeking the shareholders’ approval to repurchase up to 690 million of Dana Gas shares on ADX, which corresponds to 10 per cent of the company’s total share capital.

Dana Gas will seek shareholder’s nod in April, as the board “believes the company is currently undervalued and that a share buyback programme represents a way of enhancing shareholder value”.