By Davide Barbuscia
DUBAI, July 6 (Reuters) - Abu Dhabi-listed Dana Gas
He was speaking in a conference call to brief holders of the company's $700 million of outstanding sukuk, which will mature in October. There was no question and answer session in the call, and no immediate response from creditors.
"The company would look to communicate to the market the terms for a new restructured sukuk instrument and the process for holders to participate in such a legal and enforceable instrument over the coming weeks," Allman-Ward said.
In mid-June, Dana stunned creditors by announcing it would halt payments on its existing four-year sukuk because they no longer complied with changing interpretations of the Islamic sharia code, and had thus become unlawful in the United Arab Emirates. Dana said it would exchange the sukuk for new Islamic instruments with lower profit rates than the existing paper.
Allman-Ward said on Thursday that the mudaraba structure of the outstanding sukuk - a form of investment management partnership - had become obsolete since 2007, when Dana originally issued the debt and when that structure was common. Many features of mudaraba have now been discredited, he said.
"The sukuk market has simply evolved and no longer regards a pure mudaraba structure such as ours as being sharia-compliant and, in the case of the UAE, lawful."
Investors and bankers in Islamic finance are concerned that other sukuk issuers could imitate Dana in refusing to redeem paper on the grounds that it has lost its sharia-compliance.
Allman-Ward insisted on Thursday, however, that Dana's actions would not undermine the sukuk market as a whole, because the arguments it was using to declare its mudaraba structure illegal did not apply to other, lawful sukuk formats.
He did not provide significant new detail on Dana's sukuk restructuring plan beyond what it revealed in its mid-June statement. He said, however, that profit rates on the new sukuk would have to reflect changes in the global bond market since the existing paper was issued, as well as improvement in Dana's financial outlook.
"The global high-yield environment has materially changed since 2012, with high-yield index prices increasing by 25 to 30 percent over the period," he said.
"Applying this to our sukuk coupon rate would itself indicate a new issue yield of below 4 percent."
The existing paper, half of which is convertible into equity, features profit rates of 7 percent and 9 percent.
In its mid-June statement, Dana said its new sukuk, which would not have a conversion feature, would provide profit distributions at less than half the rates of the current sukuk. Allman-Ward did not repeat the "less than half" phrase on Thursday.
Dana and sukuk holders are contesting its plan in courts in London and the emirate of Sharjah. On Wednesday, a London High Court judge said he aimed to hold a full hearing on the case in September.
(Writing by Andrew Torchia; editing by Andrew Roche) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))
