A UAE court has suspended a UK court decision barring Sharjah-based energy firm Dana Gas from distributing cash dividends to its shareholders in the latest move in the legal battle between the company and its creditors over the legality of its $700 million sukuk.
The Sharjah Federal Court of First Instance suspended the enforcement of the UK court orders pending referral to the UAE courts to determine their enforceability. The exisiting and future sukukholders of Dana gas have also been barred from taking legal action against the firm, according to a court decision posted on Abu Dhabi Securities Exchange, where Dana Gas shares are traded.
The company is embroiled in a legal dispute over the legality of its sukuk after it shocked creditors, including investment bank Goldman Sachs and the world’s largest asset manager BlackRock, last year when it declared its Islamic bonds illegal, citing changes in sharia law. The company argued that it was, therefore, not obliged to repay the debt, and has faced legal action from creditors as a result.
On March 25, the board of Dana Gas recommended distributing 5 per cent of the company's capital as a cash dividend for the financial year 2017 - which would be the first cash dividend in its trading history. The proposal was subject to shareholder approval.
In an April 8 bourse filing, the company said that it had received an injunction from the UK High Court related to the ongoing dispute with its creditors, which prevented it from paying dividends unless it also sets aside money to redeem the sukuk. Dana gas said at the time that it will challenge the injunction brought by a US-based investment advisory firm.
In a separate development, the UAE’s market regulator, the Securities and Commodities Authority asked Dana Gas to place the UK court order before courts in the country to check whether it is enforceable, according to a SCA letter posted on the bourse website.
Despite the dispute, Dana Gas is pursuing its strategy of recovering outstanding receivables and stabilising its business amid difficult market conditions.
The company last month said it received $10.4m from the sale of Egyptian natural gas condensate, as part of the Gas Production Enhancement Agreement signed with the Egyptian government in 2014 – a mechanism to restart income generation in the North African country and help pay down overdue receivables.
In February, the energy firm reported a net profit of $83m in 2017 compared with a loss of $88m a year earlier, helped by a $1 billion payment from the Kurdistan Regional Government as part of a long-running dispute over gas payments.