Talks to resolve a dispute between Dana Gas and holders of US$700 million of Islamic securities broke down after the company proposed a 15 per cent haircut on some of the debt, according to two people familiar with the matter.
The Sharjah-based energy company suggested buying back about $200m at 85 cents to the dollar, and rolling over the rest into new securities with a profit rate of 4 per cent, the people said, declining to the identified.
Bondholders, which include Goldman Sachs and BlackRock, want the buyback to be at par and the profit rate to be higher, the people said. Dana Gas declined to comment.
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It is the latest setback in a dispute that began in June, when Dana Gas said it no longer considers its sukuk compliant with Sharia standards. It has since missed profit payments in July and didn’t repay two $350m mudarabah bonds due on October 31. The company initially proposed replacing the securities with four-year notes that pay less than half the current average 8 percent profit rate, but later retracted the offer.
Dana Gas in December said it plans to ask the UK court to set aside a November 17 judgment that went against it because the company could not participate in the trial. If its application is unsuccessful, Dana Gas will appeal against the judgment. If the appeal is successful, the issue and related matters will be reheard by the English High Court over a three-day period from January 30, the company said last month.