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Dana Gas hires advisers for convertible sukuk

Dubai, January 17, 2012

UAE energy group Dana Gas said it had appointed an international firm to advise on its $920 million convertible sukuk maturing in October, adding it would continue to meet its obligations.

Dana Gas, whose share price has been battered by concerns about how it will deal with the sukuk, said on Tuesday it would update the market with its plans in due course.

"We look forward to updating the market further when we announce our preliminary financial results on Jan. 31," chief executive Ahmed Al-Arbeed said.

Chavan Bhogaita, head of the markets strategy unit at National Bank of Abu Dhabi, said: "While today's statement from the company is certainly a welcome change to the radio silence that prevailed recently, holders of the sukuk are unlikely to take much reassurance from it.”

"Frankly, what investors want is greater clarity at the granular level of how the company is going to raise sufficient funds to repay or refinance this sukuk in October," he said.

Dana Gas shares were up 5.9 per cent at 0945 GMT, while the sukuk was unchanged at 64 cents on the dollar.

Its statement on Tuesday came almost two weeks after a Jan. 4 board meeting which included financing options on its agenda, following which the company only issued a brief note saying the board had met.

"Investors were expecting to hear (after the meeting) how Dana will deal with its 2012 maturity but nothing came out of the meeting and that uncertainty has seen the sudden and pronounced drop in the bond," said Thomas Christie, fixed income trader at Rasmala Investment Bank.

Analyst calls, only started by Dana Gas for the third quarter of 2010, stopped after it reported first-quarter numbers last year. Its head of investor relations, left on Dec. 8, a note from distressed-debt trader Exotix, published Jan. 8, said.

Constrained options

Dana, the Gulf's only listed natural gas firm, had Dh418 million ($114 million) cash, according to its third-quarter results, while investment firm Exotix said it has $260 million of potential internal liquidity available.

A second banker said Dana was eyeing a number of options for its $920 million sukuk.

Last year, Dana proposed listing some of its assets on the London Stock Exchange and sources close to the matter said the company was still looking to do so this year; although, if market conditions are unfavourable, they wouldn't proceed.

More important though for the success of the initial public offering is a resolution to the sukuk uncertainty.

"In order to do an IPO, they need to fix the problem first," the London-based banker said. "You could not IPO a business if there is no clear route to a solution for that liability."

Asset sales are also being considered.

Dana Gas has a 3 per cent stake in Hungarian group  MOL, worth around 55.2 billion forints ($225 million).

Potential sales of businesses in Egypt and Kurdistan are also fraught with political risk, which would hit the price.

Dana Gas's chief executive told Reuters in September the company was owed around $200 million by Egypt due to disagreements over contract clauses.

It said on Tuesday it was continuing to have "constructive discussions" with the government over delayed payments from state-owned entities in the country.

Dana, which saw third-quarter profit more than quadruple, was expected to post a Dh151 million profit for the fourth quarter, a 156 per cent rise, according to Global Investment House. – Reuters

Tags: UAE | Dubai | Dana Gas | debt | Convertible sukuk |

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