Dana Gas cases tricky for Islamic finance
▶ Row over unpaid sukuk risks harming UAE’s reputation
It’s been almost six months since Dana Gas stunned its creditors with the claim that its US$700 million sukuk had become non-Sharia compliant following fresh developments in Islamic finance law, meaning it was not liable to repay its debt to its creditors as agreed in October.
The Sharjah-based energy firm was branded the betenoire of the Islamic finance community; challenging the interpretation of its financing structures in such a public way was seen as jeopardising efforts by the UAE to position the country as a global hub for Sharia-compliant financing.
Fast forward to the end of the year, and Dana Gas remains defiant, continuing to fight legal battles in both the UAE and the UK. The company announced yesterday that it had lost an appeal in the English high court, protesting the court’s order allowing Blackrock, one of its largest creditors, to join in the case against it in the London court.
The turn down of the appeal came a month after the court ruled in favour of Dana’s creditors, with the judge dismissing the company’s interpretation of legal documents as “untenable and flatly inconsistent.”
Dana Gas remains defiant, continuing to fight legal battles in both the UAE and the United Kingdom
Dana has not given up its legal fight, dismissing last month’s judgment as “flawed”, and stating it would appeal. The company is also continuing to plead its case over the validity of its financing arrangements in Sharjah’s courts.
It is somewhat ironic that even as its disputes with creditors seem as intractable as ever, Dana is ending the year on a comparative high, thanks to events in Iraq. The company posted a 700 per cent increase in profits for the third quarter, after a $1 billion payment settlement with the Kurdistan Regional Government in August allowed it to reverse long-standing provisions.
Dana Gas share price is on course for its best annual performance since at least 2013.
It remains imperative that the company’s dispute with its creditors is resolved in a timely manner, to preserve what remains of its reputation in the banking community, and to prevent the UAE’s reputation of being tarnished.
For now, however, the cases in London and Sharjah continue, with a satisfactory resolution for all parties seemingly some way off.