Dana Gas offers bondholders sweetened debt deal

Mirna Sleiman
Reuters Middle East

DUBAI, Nov 22 (Reuters) - Dana Gas, in talks to

restructure a $920 million Islamic bond, is offering bondholders

cash and an average 8 percent coupon on two new sukuks to

replace the existing one, two sources said.

The natural gas producer became the first United Arab

Emirates company to miss a bond redemption when the sukuk

matured on Oct. 31. Dana reached the restructuring deal on Nov.

7, potentially averting the seizure of its Egyptian assets.

Bondholders will be paid between $80 million and $90 million

in cash and the new bonds will be equally split between a sukuk

and a convertible bond, one person familiar with the matter


After the cash payment, the balance on the Islamic bond -

which is mainly held by investment firms such as Ashmore Group

and BlackRock - will be replaced by two equal

tranches that mature in 2017.

The coupon on the combined bond is 8 percent, slightly above

the 7.5 percent on the original sukuk but on a lower amount of


"Bondholders are quite happy with the offer which does not

include a hair cut as the market had previously expected," the

source said. "The other alternative of seizing the underlying

assets wasn't the bondholders' best option."

A Dana spokeswoman declined to comment.

In 2008, Dana repurchased about $80 million of the five-year


Dana's restructuring agreement with its ad-hoc committee of

creditors gives it a breather to sort out its finances. The Abu

Dhabi-listed firm, which is based in the emirate of Sharjah, has

been hit by payment delays on gas it supplies to Egypt and

Iraq's Kurdistan region.

The terms of the proposed new sukuk instruments have been

agreed by bondholders and are expected to be made public as

early as next week, the source said.

Dana, in which Crescent Petroleum has a 20 percent stake,

had 516 million dirhams ($140 million) cash at Sept. 30, its

third-quarter earnings statement showed.

But receivables delays continued to soak up cash. The

company is owed $350 million from the Kurdistan government and

$200 million from Egypt. The company has a 3 percent stake in

Hungarian group MOL worth close to $280 million.

London-based investment firm Exotix said in a research note

on Nov. 8 that the announced restructuring terms were "creditor

friendly" and "a sharp turnaround from Dana's previously harsh

stance towards creditors."

(Additional reporting by Dinesh Nair; Editing by Helen