Dana Gas said to see creditors turn debtors as showdown deepens

09/08/2017 07:44 AST

The standoff between Dana Gas and its bondholders took a fresh twist after the Middle Eastern energy explorer that's trying to void US$700 million of its own debt was said to believe investors may even have to pay the company.

The Sharjah-based gas producer says that in one scenario the court battle with holders of the Islamic securities, or sukuk, may see it having to return less than 10 per cent of the amount it borrowed, according to a person familiar with Dana Gas's own analysis. In a second scenario, it believes creditors may have to pay it as much as $150m, the person said, adding that the case may last more than 10 years.

Dana Gas, which announced plans to restructure the debt in May, this week retracted an offer to replace the bonds and is pursuing a resolution in court. The company said in June the debt was no longer Shariah-compliant. Investors questioned the validity of the claim since neither sukuk regulations nor United Arab Emirates laws governing the matter have changed since they were issued in 2013.

"You cannot in any circumstance, in whatever structure, borrow money and then say something changed and what I issued is no longer a debt obligation, therefore I don't owe you money," said Abdul Kadir Hussain, the head of fixed-income asset management in Dubai at Arqaam Capital Ltd., which holds some of the securities. "It doesn't work that way. If any courts decided that, it would do significant damage to the Islamic capital markets."


The National

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