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Dana Gas tops Gulf sukuk as debt deal gets approval


The ACCA report has identified ‘regulation, globalisation, technology, risk management, transformation of finance, stakeholder engagement, strategy, integrated reporting and talent’ as the nine challenges faced by chief financial officers (CFOs). Photo - Jun Estrada/TIMES OF OMAN

Dubai: Dana Gas' Islamic bonds rallied last week, sending the yield down eight times more than the Arabian Gulf average, after the UAE-based fuel producer agreed on debt-refinancing terms.

The yield on the 7.5 per cent notes, originally due in October 2012, tumbled 40 basis points in the five-day period to 8.05 per cent, data compiled by Bloomberg show. That compares with a five basis-point drop for companies in the Gulf Cooperation Council (GCC) to 3.7 per cent, according to the HSBC/Nasdaq Dubai GCC Corporate US Dollar Sukuk Index. Dana Gas' shares surged 7.7 per cent on Sunday, the most since December.

The company, which failed to redeem the $920 million sukuk in October, said April 23 that shareholders and creditors agreed to a restructuring plan that splits the debt into convertible and ordinary tranches, each maturing in five years. Dana Gas also recovered more overdue payments this year from Egypt and Iraq's semi-autonomous Kurdish region, its two main source of revenue.

"I do see more upside for both the equity and the credit from current prices," Dubai-based Gus Chehayeb, director of Middle East and North Africa research at investment bank Exotix, said by phone on Sunday. "A large amount of uncertainty has been removed now that the restructuring was signed," he further added.

Frontier markets
Last week's rally brings the drop in Dana Gas' sukuk yield to 362 basis points since hitting a three-year high on October 30, according to prices compiled by Bloomberg. The sukuk (Islamic bond) handed investors a return of 16 per cent so far this year, compared with 2.7 per cent for the BofA Merrill Lynch High Yield Emerging Markets Corporate Plus Index.

The debt accord prompted Exotix to add the sukuk to its top five picks for frontier markets this quarter. Four equity analysts have a buy recommendation on the stock, two say hold and none recommend selling the shares, according to Bloomberg data. Dana Gas missed the maturity deadline in October as political turmoil in Egypt and the Kurdish region led to payment delays.

The company had earlier said in March it has received $41.3 million due from Egypt and $32.4 million from Kurdistan so far this year. It also sold 1.675 million shares in MOL Hungarian, making gross proceeds of Dh495 million ($135 million).

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