Dana Gas feels sukuk holders’ heat

Dana Gas, in an ongoing effort to circumvent a declaration of default by sukuk holders, has been granted its third injunction, the Sharjah gas major said on Sunday.

In a statement to the Abu Dhabi Securities Exchange, Dana Gas said it had received the injunction in the English High Court of Justice. It follows a similar injunction by the Sharjah Federal Court of First Instance last week.

The company aims to engage in talks with sukuk holders on bonds to the tune of USD 700 million. Issued four years ago, they are due in October, and Dana Gas runs the risk of facing a declaration of default.

The company raised eyebrows last week by having the sukuk Al mudarabah structure declared unlawful under Sharia law.

“Due to the evolution and continual development of Islamic financial instruments and their interpretation, the company has recently received legal advice that the sukuk in its present form is not Shariah-compliant and is therefore unlawful under U.A.E. law,” Dana Gas said at the time.

Legal experts have since questioned the company’s actions. Speaking to Bloomberg on Sunday, Partner at law firm King & Spalding LLP Rizwan Kanji added that Dana Gas’ efforts risks opening up avenues to the “over-engineering of sukuks.”

Representing bondholders, Weil, Gotshal and Manges lawyer Andrew Wilkinson earlier said Dana Gas’ move posed “a serious threat to the entire sukuk market.”