DUBAI, June 13 (Reuters) - Abu Dhabi's Dana Gas said it would propose restructuring $700 million of outstanding Islamic bonds on Tuesday to a committee of holders of the sukuk, which it said was not sharia-compliant.
"The company has recently received legal advice that the sukuk in its present form is not sharia-compliant and is therefore unlawful under United Arab Emirates law," it said.
Dana said it would propose exchanging the existing sukuk with new sharia-compliant instruments with four-year maturities and the new instruments would offer the right to profit distributions at less than half the rate of the existing instruments, and would not feature any conversion into equity.
Dana, whose cash balance was $298 million at the end of March, said at the time that it needed to focus on "medium-term cash preservation" because of challenges it faced over cash collections. It has said it is owed $714 million by the Kurdistan Regional Government.
Dana said it was seeking a consensual agreement with investors but had started proceedings in the UAE courts to seek a declaration on the lawfulness of its existing sukuk, which use the mudaraba format, a common Islamic finance structure which resembles an investment management partnership.
(Reporting by Andrew Torchia; editing by Louise Heavens and Alexander Smith) ((firstname.lastname@example.org; +9715 6681 7277; Reuters Messaging: email@example.com))
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