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20170613 Dana Gas outlines broad terms announcement -En.pdf

Sharjah, UAE: 13 June 2017: Dana Gas PJSC (the 'Company'), the Middle East's largest regional independent natural gas company today updates the market on discussions with holders of its Sukuk dated 8th May 2013, in line with disclosure requirements.

On 3 May 2017, Dana Gas invited the holders ('Holders') of its outstanding US$350 million 9% ordinary certificates and its US$350 million 7% exchangeable certificates, each due October 2017 (the 'Sukuk') to form an ad-hoc committee ('Committee') in order to commence discussions relating to its Sukuk.

The Company has scheduled a call with the Committee for later today during which the Company will cover the following points and set out an initial proposal for restructuring the existing Sukuk based on these broad principles and terms:

  • Due to the evolution and continual development of Islamic financial instruments and their interpretation, the Company has recently received legal advice that the Sukuk in its present form is not Shari'a compliant and is therefore unlawful under UAE law. As a result, a restructuring of the current Sukuk is necessary to ensure that it conforms to the relevant laws for the benefit of all stakeholders.
  • The Company therefore proposes to exchange the Sukuk with a new enforceable, Shari'a compliant instrument, which would have a tenor of four years, confer rights to profit distributions at less than half of the current profit rates and without a conversion feature.  Such new profit payments will comprise a cash and PIK element.
  • The new instrument would represent a fundamental improvement to the current situation for Holders as it would be enforceable and would provide repayment to Holders over time.
  • As the Company's receivables and future damages payments may be unpredictable, Dana Gas proposes to make prepayments under the new Sukuk either in whole, or in part at par, prior to its maturity without any penalty thus providing a path for early pay-down for the Holders.
  • The next two Distributions scheduled for 31 July 2017 and 31 October 2017 cannot be paid now that the existing Sukuk is deemed unlawful but will be accounted for as part of the new Sukuk instrument.

Dana Gas believes that this proposed exchange offer is in the interest of all parties and is seeking a consensual agreement with Holders. This proposed offer also takes into account the Company's need to focus on short to medium term cash preservation due to the continued challenges it faces around cash collections in KRG and Egypt. The proposed offer will allow the Company time to collect on over US$900 million of total receivables due from the KRG and Egyptian government and also obtain awards for damages from the arbitration cases with the KRG and NIOC.

The Company has also commenced proceedings in the UAE courts in order to seek a declaration as to the lawfulness of its existing Mudaraba Sukuk and intends to adopt other legal measures as necessary to protect its assets and interests as well as its commitment to its shareholders to remain Shari'a compliant.

During the 2012 restructuring, representatives of the Holders unnecessarily declared a Technical Default while negotiations were still ongoing, causing lasting harm.  The Company now assures all parties that no Dissolution Event nor Technical Default has taken place, nor indeed can take place due to the unlawful nature of the Sukuk.  While the Company is keen to reach a consensual agreement with the Holders, Dana Gas has a duty to protect the assets of the Company for the benefit of all stakeholders and will take action to fulfill this duty.

Patrick Allman-Ward, Chief Executive Officer of Dana Gas said:

"Since the Sukuk were put in place in May 2013, Dana Gas has been transformed.  Against a backdrop of significant operational progress, the Company has had clear successes in its arbitration cases and now has approximately US$900 million of undisputed receivables from two Governments.  The Company's risk profile has changed very positively and the outstanding balance of the Sukuk has been reduced from $1 billion to the current US$700 million despite continued challenges around collections. The Company however still needs time to deliver fully on its potential and in the meantime must preserve its financial strength so that it can realize the full value of its assets for the benefit of all stakeholders."

For media enquiries please contact:

Azadeh Varzi / Fiona Micallef Eynaud

Brunswick Group LLP

Tel: +442074045959

Email: danagas@brunswickgroup.com

About Dana Gas

Dana Gas is the Middle East's first and largest regional private sector natural gas Company established in December 2005 with a public listing on the Abu Dhabi Securities Exchange (ADX). It has exploration and production assets in Egypt, Kurdistan Region of Iraq (KRI) and UAE, with 2P reserves exceeding one billion boe and average production of 67,050 boed in 2016. With sizeable assets in Egypt, KRI and the UAE, and further plans for expansion, Dana Gas is playing an important role in the rapidly growing natural gas sector of the Middle East, North Africa and South Asia (MENASA) region. Visit:  www.danagas.com

246Dana Gas  Outlines  Broad Terms  For  Sukuk Discussions

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