UK court favors Dana Gas creditors in $700 mln Islamic bond case

Judge rejects Dana challenges to purchase undertaking

DUBAI, Nov 18, (RTRS): A London High Court judge has ruled in favour of creditors in a dispute over whether United Arab Emirates energy company Dana Gas must repay $700 million of Islamic bonds.

Dana Gas had said it was under no obligation to pay bondholders because of changes in Islamic finance, but Judge George Leggatt ruled that the company’s challenges to the purchase undertaking behind the bonds were “unfounded” and that the agreement was “valid and enforceable”.

The case, which Dana said it would continue to fight in Britain and the UAE, is being closely watched by the global Islamic finance industry because some investors think it could set a precedent for other issuers of Islamic bonds, or sukuk, to refuse to redeem the debt at maturity.

Dana says it does not have repay its sukuk, which matured last month, because changes in the interpretation of Islamic finance over the past few years mean the instruments are no longer sharia-compliant and have become unlawful in the UAE.

That argument is disputed by sukuk holders including global fund manager BlackRock and by Deutsche Bank, which is representing investors.

The case was heard in London because the sukuk was written under English law.

Dana said on Friday that it would appeal the High Court ruling because some of its shareholders had obtained an injunction in a UAE court that prevented it from participating in the London hearings.

The company also said it was looking ahead to a hearing by a UAE court on whether the structure of the sukuk — a form of investment management partnership known as mudaraba — was valid. That hearing is scheduled for Dec 25.

“It now turns to the UAE legal proceedings to give finality to the matter,” Dana said.

The company denies that its case might set a precedent for the $370 billion global sukuk market, arguing that only a very small number of sukuk issuers now use the mudaraba structure.

A committee representing sukuk holders said in a statement on Friday that it hoped the High Court

ruling would pave the way for Dana to come to the negotiating table and discuss “possible consensual solutions”.

Dana did not address the idea of a negotiated settlement in its statement on Friday.

Also:

BEIRUT: Iran has exported 1.2 billion cubic meters of gas to Iraq since late June, the managing director for the

Iranian Gas Transmission Company, Saeed Tavakoli, said Saturday, according to SHANA, the website of the Iranian oil ministry.

Iran has planned for the export of up to 25 million cubic meters of gas per day to Baghdad, Tavakoli said.

The neighbors, both members of the Organization of the Petroleum Exporting Countries, initially signed a deal in 2013 for Iran to supply Iraqi power stations, but officials in the

past blamed poor security in Iraq for hampering implementation.

Iran signed two contracts to export gas, one for the Iraqi capital Baghdad and the other for southern Iraqi city of Basra, Iranian state media reported in June.

Tavakoli said Saturday that exports of up to 25 million cubic meters of gas per day to Basra will start as soon as Iraq is ready.

Iran, which has huge gas reserves

alongside its oil resources, exports small amounts of gas to Turkey but production has struggled to keep pace with rising domestic consumption.

Experts say years of Western sanctions over Iran’s disputed nuclear program have also hindered development of gas projects. Some sanctions have been lifted since a nuclear deal was reached with Western powers.