Sharjah-based Dana Gas sought to have US$700 million worth of Islamic bonds declared unlawful so it could avoid repaying investors next month, London’s High Court heard on Monday, a charge the company has denied.
The company’s claim that a huge 2013 financing deal was invalid owing to subsequent changes in Islamic financial practice was “absurd”, according to documents filed by bondholders with the court.
The bondholder group, led by Blackrock, the world’s largest asset manager, was in court on Monday demanding that Dana Gas repays millions of pounds, or hand over stock in a subsidiary that runs its operations in Egypt.
It also wanted the court to ban Dana Gas from issuing any new sukuk to secure further funds for the company. Dana Gas stunned the Islamic finance community in June by declaring the $700m sukuk Sharia non-compliant just four months before it was due to repay bond-holders.
The courtroom battle is notable for the absence of Dana Gas, which has been prevented from taking part because of an injunction in the UAE.
Lawyers for Blackrock claim that the injunction had been a deliberate attempt by the company to frustrate the court hearing, but a high court judge ruled last week that the trial in London would go ahead as planned.
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Dana Gas sukuk trial to continue in London on Monday
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The complex case is being keenly watched by the Islamic finance industry, with both London and the UAE seeking to position themselves as world leaders within the sector.
“Obviously if there is an adverse judgement out of the London court it will raise a lot of questions particularly in the minds of non-Sharia investors and there are a fair amount of non-Sharia investors who invest in sukuk,” said Abdul Kadir Hussain, the head of fixed-income asset management in Dubai at Arqaam Capital, which holds some of the Dana Gas sukuk.
Any prospect of an early conclusion to the case has been disputed by Dana Gas, which has claimed that litigation could continue in the UAE whatever the ruling in London and could last up to ten years, according to court documents.
“While markets have short memories, I think this case has already negatively impacted international investor appetite for Sukuk - most likely in the corporate (Vs bank and sovereign) sector,” said Khalid Howladar, the managing director of the risk and ratings Islamic finance advisory Acreditus.
“The complexity of the sukuk industry was already an inhibitor to growth and these recent events will cause some investors to avoid the sector completely and drive up the profit rates demanded by remaining investors. Regulatory intervention is needed to restore confidence.”
Dana Gas secured $850m from international investors in May 2013 via the restructuring of an earlier $1 billion deal secured that had been due to mature in 2012. The company was unable to repay that deal because of payment delays from operations in Egypt and the Kurdish region of Iraq.
“If all had gone well, the value … would be sufficiently large that the investments would be liquidated for an amount that was at least as large” as the money invested, said Richard Handyside QC, for the BlackRock-led group of investors, which also includes investment bank Goldman Sachs.
Dana Gas made quarterly payments according to the terms of the agreement until April 2017, but announced in May that it would embark on new restructuring talks with sukuk holders because of continued cash collection problems.
The following month, it sought a court order in Sharjah arguing that it should no longer make payments because Islamic finance standards had changed making them unlawful under UAE law. The company also took legal action in the UK and the British Virgin Islands, where its Egypt subsidiary was registered, to prevent further payments to investors.
It was clear that Dana Gas’s challenge to the lawfulness of the agreement struck between the company and investors was “in order to avoid its obligations upon maturity of the sukuk” on October 31, according to court papers.
It said claims by an expert witness on UAE law for the company that the investors had deliberately sought to introduce illegal elements to the agreement was “nonsense”.
The company – which had redeemed $150m of the sukuk - outlined a new four-year plan on “materially worse” terms to the investors, according to the documents on behalf of the investors.
On an investor call in July, Dana Gas chief executive Patrick Allman-Ward said that the new terms reflect material changes in the global high yield environment since 2012, the company’s improved credit position, and increased gas production.
The complexity of the case is linked to the multiplicity of contracts signed in both UK and UAE jurisdiction before the company secured the $850m investment. The company contends that it received legal advice that made part of the sukuk illegal under the laws of the UAE, bringing down the whole deal.
The investors claimed that part of the agreement was struck under UK corporate law, to ensure that their payments would be protected in the event of a change in Islamic financial practice. It claimed that the agreement was “lawful and enforceable under UAE law” and the company had to pay up.
“Issues of UAE law… are not the central issues in this trial,” the document said. The trial, which is expected to last up to two weeks, is due to hear evidence from the former general counsel of Dana Gas.
Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
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Premier League, kick off 7.30pm (UAE)
PULITZER PRIZE 2020 WINNERS
JOURNALISM
Public Service
Anchorage Daily News in collaboration with ProPublica
Breaking News Reporting
Staff of The Courier-Journal, Louisville, Ky.
Investigative Reporting
Brian M. Rosenthal of The New York Times
Explanatory Reporting
Staff of The Washington Post
Local Reporting
Staff of The Baltimore Sun
National Reporting
T. Christian Miller, Megan Rose and Robert Faturechi of ProPublica
and
Dominic Gates, Steve Miletich, Mike Baker and Lewis Kamb of The Seattle Times
International Reporting
Staff of The New York Times
Feature Writing
Ben Taub of The New Yorker
Commentary
Nikole Hannah-Jones of The New York Times
Criticism
Christopher Knight of the Los Angeles Times
Editorial Writing
Jeffery Gerritt of the Palestine (Tx.) Herald-Press
Editorial Cartooning
Barry Blitt, contributor, The New Yorker
Breaking News Photography
Photography Staff of Reuters
Feature Photography
Channi Anand, Mukhtar Khan and Dar Yasin of the Associated Press
Audio Reporting
Staff of This American Life with Molly O’Toole of the Los Angeles Times and Emily Green, freelancer, Vice News for “The Out Crowd”
LETTERS AND DRAMA
Fiction
"The Nickel Boys" by Colson Whitehead (Doubleday)
Drama
"A Strange Loop" by Michael R. Jackson
History
"Sweet Taste of Liberty: A True Story of Slavery and Restitution in America" by W. Caleb McDaniel (Oxford University Press)
Biography
"Sontag: Her Life and Work" by Benjamin Moser (Ecco/HarperCollins)
Poetry
"The Tradition" by Jericho Brown (Copper Canyon Press)
General Nonfiction
"The Undying: Pain, Vulnerability, Mortality, Medicine, Art, Time, Dreams, Data, Exhaustion, Cancer, and Care" by Anne Boyer (Farrar, Straus and Giroux)
and
"The End of the Myth: From the Frontier to the Border Wall in the Mind of America" by Greg Grandin (Metropolitan Books)
Music
"The Central Park Five" by Anthony Davis, premiered by Long Beach Opera on June 15, 2019
Special Citation
Ida B. Wells
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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New Zealand
Penalties: Barrett (7)
British & Irish Lions
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Penalties: Farrell (4)
Conversions: Farrell
UAE-based players
Goodlands Riders: Jamshaid Butt, Ali Abid, JD Mahesh, Vibhor Shahi, Faizan Asif, Nadeem Rahim
Rose Hill Warriors: Faraz Sheikh, Ashok Kumar, Thabreez Ali, Janaka Chathuranga, Muzammil Afridi, Ameer Hamza
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Healthy tips to remember
Here, Dr Mohamed El Abiary, paediatric consultant at Al Zahra Hospital Dubai, shares some advice for parents whose children are fasting during the holy month of Ramadan:
Gradual fasting and golden points - For children under the age of 10, follow a step-by-step approach to fasting and don't push them beyond their limits. Start with a few hours fasting a day and increase it to a half fast and full fast when the child is ready. Every individual's ability varies as per the age and personal readiness. You could introduce a points system that awards the child and offers them encouragement when they make progress with the amount of hours they fast
Why fast? - Explain to your child why they are fasting. By shedding light on the importance of abstaining from food and drink, children may feel more encouraged to give it there all during the observance period. It is also a good opportunity to teach children about controlling urges, doing good for others and instilling healthy food habits
Sleep and suhoor - A child needs adequate sleep every night - at least eight hours. Make sure to set a routine early bedtime so he/she has sufficient time to wake up for suhoor, which is an essential meal at the beginning of the day
Good diet - Nutritious food is crucial to ensuring a healthy Ramadan for children. They must refrain from eating too much junk food as well as canned goods and snacks and drinks high in sugar. Foods that are rich in nutrients, vitamins and proteins, like fruits, fresh meats and vegetables, make for a good balanced diet
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Gender pay parity on track in the UAE
The UAE has a good record on gender pay parity, according to Mercer's Total Remuneration Study.
"In some of the lower levels of jobs women tend to be paid more than men, primarily because men are employed in blue collar jobs and women tend to be employed in white collar jobs which pay better," said Ted Raffoul, career products leader, Mena at Mercer. "I am yet to see a company in the UAE – particularly when you are looking at a blue chip multinationals or some of the bigger local companies – that actively discriminates when it comes to gender on pay."
Mr Raffoul said most gender issues are actually due to the cultural class, as the population is dominated by Asian and Arab cultures where men are generally expected to work and earn whereas women are meant to start a family.
"For that reason, we see a different gender gap. There are less women in senior roles because women tend to focus less on this but that’s not due to any companies having a policy penalising women for any reasons – it’s a cultural thing," he said.
As a result, Mr Raffoul said many companies in the UAE are coming up with benefit package programmes to help working mothers and the career development of women in general.
Profile Box
Company/date started: 2015
Founder/CEO: Mohammed Toraif
Based: Manama, Bahrain
Sector: Sales, Technology, Conservation
Size: (employees/revenue) 4/ 5,000 downloads
Stage: 1 ($100,000)
Investors: Two first-round investors including, 500 Startups, Fawaz Al Gosaibi Holding (Saudi Arabia)
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