Middle East gas producer's bid to void debt baffles analysts

Dubai

A DECISION by a Middle Eastern gas producer to declare its own Syariah-compliant bonds unlawful has baffled investors in the US$2 trillion Islamic finance industry.

Sharjah-based Dana Gas PJSC said that it no longer considered its two Islamic bonds totalling US$700 million issued four years ago as Syariah compliant under the United Arab Emirates' law. A court in Sharjah has since barred bondholders from taking any action against the company's securities until it reviews Dana Gas's application to declare its debt "unlawful and unenforceable".

"As creditors we understand that this is a liquidity and a payment issue, not a solvency issue - but clearly the company is trying to squeeze sukuk holders to the benefit of shareholders and that is a strategy that will end up hurting everybody down the road," said Abdul Kadir Hussain, the head of fixed-income asset management at Arqaam Capital Ltd. Even if there were pot…