BLBG:Dana Gas Asks Bondholders for Standstill After Payment Miss
Dana Gas PJSC (DANA) said it’s in talks for a so-called standstill agreement with bondholders after the United Arab Emirates fuel producer failed to pay almost $1 billion in Islamic debt on maturity last week.
The company and a committee of bondholders “are currently negotiating the necessary standstill and lock-up agreement which the parties are working together to conclude soon,” Dana Gas said in a statement to the Abu Dhabi bourse today. Under a standstill accord, creditors agree not to make an effort to collect debt payments or claim assets backing a security.
The missed payment spurred concern holders of the debt may seize company assets in Egypt. The 7.5 percent sukuk are secured against assets in the North African country, as well as the company’s Sajaa Gas Private Ltd. and United Gas Transmissions Co. units. Dana Gas faced payment delays this year due to political instability in Egypt and Iraq’s Northern Kurdish region, its biggest sources of revenue.
“It is unclear whether discussions have fallen apart and if sukuk holders are going after Dana’s assets,” Gus Chehayeb, the Dubai-based research director for the Middle East and North Africa at Exotix Ltd., said yesterday. “It takes a 25 percent vote to dissolve the sukuk and order immediate payment from Dana. If an immediate payment is not made it’s a race for the Egyptian and U.A.E. assets.”
The fuel producer, which is based in the U.A.E. emirate of Sharjah, missed the Oct. 31 deadline to repay the principal and interest on the debt sold in 2007. Bondholders need to confirm whether they want the trust holding the assets backing the notes to be dissolved, Dana Gas said in a statement yesterday.
Shares Recover
Dana Gas surged as much as 7.5 percent to 41 fils in Abu Dhabi on volumes of more than three times the three-month daily average. The shares, which were trading at 41 fils as of 1:27 p.m, fell to the lowest close in almost two months yesterday.
“It would be surprising at the current stage for Dana Gas to have received formal notice that the creditors were moving to seize the underlying assets given the lack of a formal declaration of default,” Emad Mostaque, a London-based strategist at Religare Hichens Harrison, said yesterday. “It is likely a deal can be made to extend payment.”
The company is negotiating with holders of the securities to alter the terms on the debt, including extending maturities, Dana Gas said Nov. 1. Third-quarter profit fell 27 percent, missing an estimate of EFG-Hermes Holding SAE.
The fuel producer has $920 million of bonds outstanding after purchasing $80 million of the securities beforehand. Dana Gas appointed Deutsche Bank AG, Blackstone Group LP and Latham & Watkins LLP to advise on the restructuring, while sukuk-holders hired investment bank Moelis & Co. and law firm Linklaters LLP.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net; Dale Crofts at dcrofts@bloomberg.net
