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Thursday, 22 June 2017

Fitch: Dana Gas Case Highlights Sukuk Legal Uncertainties | Reuters

Fitch: Dana Gas Case Highlights Sukuk Legal Uncertainties | Reuters:

"Any potential credit rating implications for sukuk arising from Dana Gas's attempt to have its mudaraba sukuk declared unlawful will take time to emerge, and their scope and impact are likely to remain unclear until all relevant proceedings are resolved, if they ever are, Fitch Ratings says. We believe our current assumption that sharia compliance typically does not have credit implications for Fitch-rated sukuk remains appropriate. Resolving the relevant issues could be a complex and drawn-out process with uncertain implications and the potential for a market or regulatory response. Fitch does not rate Dana Gas or its sukuk. Dana Gas publicly stated on 13 June 2017 that it had "received legal advice that the sukuk in its present form is not sharia compliant and is therefore unlawful under UAE law" and that it had started court proceedings in the UAE to have the sukuk declared unlawful and unenforceable. It has proposed restructuring the sukuk "to ensure that it conforms to the relevant laws" and also to take into account "the Company's need to focus on short to medium term cash preservation". Sukuk distributions due on 31 July and 31 October "cannot be paid now that the existing sukuk is deemed unlawful but will be accounted for" as part of the restructured instrument, Dana Gas said. Sukuk regulations have been introduced and updated in several countries in recent years, but standardisation, harmonisation and legal precedents are limited in most jurisdictions. "

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