Dana Gas extends legal action over $700 million sukuk

Dana Gas, the Sharjah-based gas operator, said in a statement to the Abu Dhabi Securities Exchange on Sunday it had been granted an injunction in the English High Court of Justice, adding to injunctions it previously secured from courts in Sharjah and the British Virgin Isles.

The move is part of a campaign of pre-emptive action Dana Gas has taken to try to avoid a declaration of default by sukuk holders on the Islamic law-compliant bonds totalling US$700 million, which are due in October.

In an unprecedented move, Dana Gas had the specific kind of sukuk structure it has used – sukuk Al mudarabah – declared unlawful under Sharia law by a Sharjah court, a ruling which has then been the basis of the injunctions. Representatives of the sukuk holders said they plan to fight in all the relevant courts.

Andrew Wilkinson, a lawyer with Weil, Gotshal and Manges in London, which is representing the bondholders, had said ahead of Dana Gas’ latest injunction that the company appeared to be ignoring the English law provisions that govern the terms of the bonds. He said the action by Dana Gas threatened to be “costly multi-jurisdictional litigation which poses a serious threat to the entire sukuk market”.

Dana Gas management has said it wants to resolve the restructuring through talks but also wants to avoid a declaration of default, as happened in previous negotiations four years ago, and which it says has led to an unnecessary financial strain on the company.

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