Bloomberg News

Dana $1 Billion Bond Yield Drops Most on Record on Payment Bets

January 17, 2012

Jan. 17 (Bloomberg) -- The yield on Dana Gas PJSC’s $1 billion Islamic bonds fell the most on record after the United Arab Emirates energy company promised to meet debt obligations.

The rate on the 7.5 percent sukuk due in October dropped 19 percentage points to 52.7 percent at 6:53 p.m. in Dubai, according to data compiled by Bloomberg. The price climbed to 72.56 cents on the dollar. Dana Gas shares closed unchanged at 34 fils after earlier gaining as much as 8.8 percent.

“Dana Gas over the last four years has timely and consistently paid, on or before the due date, the sukuk profit amount and will continue to do so pursuant with its obligations,” the company said in a statement today. Dana Gas appointed a financial adviser and will report financial results Jan. 31 as well as provide an operational update, it said.

Bonds and shares of Dana Gas, which gets most of its output from Egypt and the Kurdish region of northern Iraq, have tumbled on investor concern the Sharjah, U.A.E.-based company may struggle to repay debt. It may restructure the sukuk at 61.5 percent of the par value, investment bank Exotix Ltd. said in a report on Jan. 8.

“It’s very important that the announcement came, the question is why it took so long,” Mohammed Ali Yasin, chief investment officer at Capm Investment PJSC in Abu Dhabi, said by phone today. “Still, stock and bond investors want more than just a general statement, they want specifics and investors will be waiting for the announcement on Jan. 31.”

Stocks Slump

The yield on the Islamic bonds, which comply with the religion’s ban on paying and receiving interest, jumped 17 percentage points yesterday to 71.8 percent. The company’s shares have tumbled 54 percent in the past 12 months.

The sukuk, even after today’s move, is yielding more than 11 times the average rate on Islamic debt in the six-nation Gulf Cooperation Council, which includes the U.A.E. and Qatar, the HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index shows. The yield on the region’s debt rose five basis points yesterday to 4.56 percent.

“The falling bond price made them react, although in terms of the announcement, it doesn’t say anything new,” Atul Gharde, a Hong Kong-based credit analyst at SJS Markets Ltd., said in an e-mail in response to questions from Bloomberg News. “The markets are not conducive for any capital market transaction or even refinancing at present. My guess is they will try to repay given the huge reputational risk.”

Payments

Dana Gas received a total of $177 million in payments from Egypt and the Kurdish region last year, it said today. Output in Egypt, where clashes have continued between security forces and protesters since President Hosni Mubarak’s ouster in February, fell 4.6 percent in the third quarter to the equivalent of 3.72 million barrels of oil.

The company’s board on Jan. 4 considered updates on its stake in Mol Nyrt. as well as on financing projects in Egypt and the U.A.E., Dana Gas said at the time, without giving further details. Its unlisted parent Crescent Petroleum Co. owns 3 percent of Mol, Hungary’s largest oil refiner, according to data compiled by Bloomberg.

--Editors: Claudia Maedler, Daliah Merzaban

To contact the reporter on this story: Shaji Mathew in Dubai at shajimathew@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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