DANA’S APPEAL BID REJECTED BY UK COURT

▶ Sharjah firm says London courts’ decision over $700m sukuk is flawed

Dana Gas, the Sharjah energy company embroiled in court battles over the legality of its US$700 million sukuk, said yesterday the English high court of appeal rejected the company’s application to appeal against an order allowing its creditor Blackrock to join in the English court proceedings.

The company declared in June that its sukuk, which it was seeking to restructure, had become non Sharia-compliant following developments in Islamic finance, and that it was therefore not obliged to repay its debt to creditors, which matured in October. These creditors include New York’s BlackRock, the world’s biggest asset manager.

On November 17, London’s high court ruled in favour of creditors, further complicating the legal case. Judge George Leggatt found Dana Gas’s interpretation of legal documents “untenable and flatly inconsistent”.

Last month Dana Gas said it planned to challenge the London court ruling, enforcing the legality of the company’s sukuk, as the judgement issued was “flawed”.

This is the second time Dana Gas has sought to restructure Islamic bonds, following a deal with creditors in 2013 over a $1 billion sukuk that matured in October 2012. The company had faced cash flow issues due to outstanding payments from Egypt and the semi-autonomous Kurdish region of Iraq, where a large portion of its assets and production facilities are located.

Dana Gas said yesterday it is proceeding with high court application to set aside the November 17 ruling, on the grounds that the company was unable to represent itself in court because of a mandatory injunction from a court in Sharjah.

On September 17, the emirate’s Court of First Instance issued an anti-suit injunction preventing the oil and gas company from participating in the UK trial. But Dana Gas said earlier this month that the Sharjah Court of Appeal had lifted the injunction.

If the application to challenge the November 17 ruling is unsuccessful, Dana Gas will seek permission to appeal against the ruling. If the application is successful, preliminary issues will be re-heard by the high court in a three-day hearing from January 30, the company said.

Following the London court ruling, the bondholder side, led by Blackrock, called on the company to strike a deal.

But Dana Gas wants to pursue legal proceedings in the UAE regarding the validity of its sukuk, which are based on Mudarabah contracts.

“There remain numerous legal issues under UAE law relating to the validity of the Mudarabah Agreement which remain before the Sharjah UAE Federal Court and need to be determined,” Dana Gas said yesterday.

“The company will take such steps as it can to have the UAE proceedings dealt with as quickly as possible.”

Dana Gas last month posted a 700 per cent increase in its third quarter net profit due to the favourable outcome of its arbitration dispute with the Kurdistan Regional Government (KRG) in August.

The increase in profitability came as the company reversed its provision for payments to the KRG. Under the terms of the settlement, the KRG agreed to pay the Pearl Consortium a sum of $600m, together with a $400m payment to be allocated towards the consortium’s further investment in the region’s gasfields.