Bloomberg News

Dana Gas $1 Billion Sukuk Yield Rises to Record on Debt Risk

January 06, 2012

(Updates bond yield in second paragraph and Mol shares.)

Jan. 5 (Bloomberg) -- Dana Gas PJSC’s Islamic bond yield surged to a record after the company failed to provide details on how it plans to repay $1 billion of sukuk due in October.

The yield on the 7.5 percent Shariah-compliant notes jumped 504 basis points, or 5.04 percentage points, to 45.4 percent at 4:41 p.m. in Dubai. The price sank to 75.56 cents on the dollar. Dana Gas shares fell 2.2 percent, the most in more than a week, to 44 fils after plunging 38 percent last year.

The company’s board yesterday considered updates on its stake in Mol Nyrt. as well as on financing projects in Egypt and the United Arab Emirates, Dana Gas said today, without giving further details. Dana Gas’s unlisted parent Crescent Petroleum Co. owns 3 percent of Mol, Hungary’s largest oil refiner, according to data compiled by Bloomberg.

“We would have expected something from the management on the refinancing of the sukuk,” Atul Gharde, a Hong Kong-based analyst at SJS Markets Ltd., said in an e-mail. “But times are difficult for them, especially since political tensions in Iraq and Egypt continue to negatively impact the company.”

Dana Gas, with most of its output coming from Egypt and the Kurdish region of northern Iraq, said in November it is in talks with banks for advise on refinancing the sukuk, financial strategy and plans to list the company’s exploration and production business on the London Stock Exchange. Islamic bonds comply with the religion’s ban on paying and receiving interest.

‘External Financing’

The sukuk is yielding more than 10 times the average rate on Islamic debt in the six-nation Gulf Cooperation Council, which includes Saudi Arabia and the U.A.E., the HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index shows. The yield on the region’s debt rose one basis point yesterday to 4.28 percent.

“We are still unable to see a repayment strategy using the company’s internal resources, which means that external financing is key," Abdul Kadir Hussain, chief executive officer at Mashreq Capital DIFC Ltd., said by phone interview. ‘‘We need a well enunciated plan by the company before buying it.’’

Sharjah, U.A.E.-based Dana Gas is owed about $200 million by Egypt’s government related to natural-gas sales, Chief Executive Officer Ahmed al-Arbeed said in November. Unrest in Egypt last year led to the ouster of President Hosni Mubarak, draining 44 percent of its foreign reserves and slowing economic growth in the fiscal year that ended in June to 1.8 percent from 5.1 percent.

Production in Egypt fell 4.6 percent in the third quarter to the equivalent of 3.72 million barrels of oil, as it slowed drilling ‘‘in order to balance capital expenditure with the collection of accounts receivable,’’ Dana Gas said in November.

Mol’s shares fell 2.7 percent to 16,345 forint at 1:43 p.m. in Budapest. The Budapest Stock Exchange Index, in which Mol has a 33 percent weighting, weakened 2.5 percent to 16,155.02.

--Editors: Shaji Mathew, Claudia Maedler

To contact the reporter on this story: Dana El Baltaji in Dubai at delbaltaji@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net


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