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Dubai / Reuters
United Arab Emirates energy producer Dana Gas did not redeem some $700 million of its Islamic bonds when they matured on Tuesday as a dispute on the validity of the sukuk drags on in British and UAE courts, sources familiar with the matter said.
Dana refuses to redeem
its bonds because it claims changes in the interpretation of Islamic finance over recent years means the securities are no longer sharia-compliant and have become unlawful in the UAE.
But sukuk holders will not be able to declare a debt default because of injunctions
issued in June by British and UAE courts, which prevented the holders from enforcing claims pending a resolution of the case. The case is being closely watched by the global Islamic finance industry because some investors think it could set a precedent for other sukuk issuers.
Dana, however, believes its case will not set a precedent because the mudaraba structure of its sukuk is different from most other Islamic bonds in the market, a source close to the situation said. Sukuk outstanding globally total close to $370 billion, but instruments with the same structure as Dana’s bond comprise less than 5 percent of total issues by value, said the source.
In the latest London
hearing, earlier this month, High Court judge George Leggatt adjourned proceedings to give time to the company to appeal against an injunction, requested by some of the company’s shareholders and granted by the Sharjah court, preventing the company from taking part in the London trial.