Goldman, BlackRock Offer Dana Deal to End $700 Million Debt Saga

(Bloomberg) -- Dana Gas PJSC bondholders, including BlackRock Inc. and Goldman Sachs Group Inc., submitted a proposal to the Middle Eastern energy producer to resolve a dispute over a $700 million sukuk that shocked the Islamic finance industry this year. A person close to the company said the terms aren’t acceptable.

The deal, which has support from over 70 percent of sukukholders, includes a cash pay-down of $300 million at par and a dual-listing of the company’s shares on the London Stock Exchange, the ad hoc committee of bondholders said in a statement. It also sought a maturity extension of three years.

The proposal isn’t acceptable and the company is moving ahead with its litigation strategy in the U.K. and the United Arab Emirates, a person close to Dana Gas said, declining to be identified because the person isn’t authorized to speak publicly.

The Sharjah, U.A.E.-based energy producer is seeking to restructure debt for the second time in five years as it struggles to recover payments from Egypt and Iraq’s Kurdish region. After announcing in June that its own facilities don’t comply with Shariah principles, the company offered to replace two outstanding sukuk with four-year bonds that pay less than half the current average 8 percent profit rate.

But it retracted that proposal on July 31, the day it missed a profit payment on its sukuk, in favor of a court settlement.

“We have always wished to negotiate a consensual restructuring of the sukuk, in response to the company’s request for an extension,” Andrew Wilkinson at Weil, Gotshal & Manges LLP, which is advising the ad hoc committee, said in the statement. “We hope that Dana’s management sees this as a good proposal, which would deliver a stable capital structure going forward, enabling value creation for all stakeholders.”

Read More: Dana Takes Debt Offer Off Table on Day Profit Payment Is Due

The key terms of the proposal submitted by ad hoc committee of bondholders are:

• A cash pay-down of $300 million at par, split equally between the ordinary and exchangeable certificates
• A maturity extension of three years
• The rate applicable for periodic distributions on the ordinary and exchangeable certificates remains unchanged at 9 percent and 7 percent per annum, respectively
• The effective exchange (conversion) price for the reinstated exchangeable certificates to remain unchanged at 0.75 dirham
• There is also a requirement from the ad hoc committee to initiate a dual listing on the London Stock Exchange
• Settlement of all periodic distributions, including the outstanding distribution scheduled for July 31, 2017, and the upcoming periodic distribution on Oct. 31

The Kurdistan Regional Government last month agreed to pay Dana Gas and its partners in Pearl Petroleum $600 million over delays at a natural gas project, plus a further $400 million to invest in development of fields in the region. The deal ends an arbitration process that lasted almost four years.

To contact the reporters on this story: Kit Chellel in London at cchellel@bloomberg.net, Dana El Baltaji in Dubai at delbaltaji@bloomberg.net.

To contact the editors responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net, Shaji Mathew, Dinesh Nair