Dana Gas announces terms of US$1 billion Sukuk refinancing
Significant reduction of outstanding debt to US$850 million with
overall lower debt servicing requirements
• Deal structured to ensure that potential dilution of shareholders
remains substantially similar to current levels
• Refinancing will place Dana Gas on a stronger financial footing in the interests of all stakeholders
Dana Gas PJSC, (‘Dana Gas’ or ‘the Company’), the Middle East’s first and largest private sector natural gas company, is pleased to announce the detailed terms, conditions and implementation information for the refinancing transaction (the “Transaction”) in relation to its US$1 billion 7.5% Sukuk-al-Mudarabah due 31 October 2012 (the “Existing Sukuk”).
Key Transaction Highlights:
• Lock-up and Standstill Agreement signed by the Ad Hoc Committee of Sukukholders (‘The Ad Hoc Committee’), which represents the majority of the outstanding principal amount of the Existing Sukuk. Subject to the terms of the Agreement, the members of the Ad Hoc Committee have undertaken to vote in favour of the Transaction
• Reduction in the Company’s outstanding debt from US$1 billion to US$850 million via US$70m cash pay-down and cancellation of another US$80 million of the Existing Sukuk already owned by the Company
• Remaining US$850 million split into two tranches to ensure potential dilution for shareholders remains substantially similar to current levels: a US$425 million Ordinary Sukuk and US$425 million Convertible Sukuk (together the “New Sukuks”), each with 5-year maturity to ensure longterm financing
• The average combined profit rate on the two New Sukuks is 8%,representing a slight increase over the Existing Sukuk profit rate of 7.5%
• This average profit rate of 8%, together with the lower debt amount of US$850 million, constitutes a lower debt servicing obligation on the Company as compared to the debt servicing obligations under the Existing Sukuk
• The security package available to holders of the New Sukuks will be enhanced by US$300 million of value (inclusive of security over receivables of the Company’s Egyptian assets), but is restricted to the Company’s Egyptian assets and certain UAE assets
• The Conversion price of the Convertible Sukuk has been set at a 50% premium to the 75 calendar day volume-weighted average price,measured over a period commencing on 1 December 2012 (with a floor of AED 0.75 and cap of AED 1.00)
• Dana Gas has the option to pay down the outstanding principal amount of the New Sukuks prior to the new maturity date of 31 October 2017,subject to the applicable call premia on the Ordinary Sukuk and the soft call provisions on the Convertible Sukuk.
Dr. Adel Khalid Al-Sabeeh, Chairman of the Board of Dana Gas said,“We believe that the terms being announced today represent a comprehensive, long-term solution which balances the interests of all stakeholders. The Board plans to secure necessary stakeholder consents for implementation of the Transaction, while the Company continues to focus on achieving its growth potential over the coming years and continue to realise value.”
Rashid Al-Jarwan, Executive Director and Acting Chief Executive Officer of Dana Gas said:
“Dana Gas has a robust asset base and has successfully grown revenues,production, reserves and asset values consistently over the last 5 years, in line with our strategy. The Company’s liquidity constraints were caused by wellknown external factors, and we believe that these revised terms of the New Sukuks place Dana Gas on a firm foundation for further growth and progress.”
Subject to approval by sukukholders and shareholders, the Transaction will include:
Reduction in Company’s outstanding debt from US$1 billion to US$850 million:
The Company’s debt burden will immediately be reduced by US$150 million via (i) US$70 million cash pay-down of the Existing Sukuk at closing (which may, for a period prior to closing of the Transaction, be increased at the option of the Company), and (ii) the cancellation of US$80 million principal amount of the Existing Sukuk already owned by the Company.
The remaining principal amount of the Existing Sukuk of US$850 million will be split into two new sukuk instruments with a five year maturity consisting of an Ordinary Sukuk and a Convertible Sukuk of equal principal amounts of US$425 million each (reduced pro-rata if cash pay-down at closing is greater than US$70 million).
Each existing sukukholder will be allocated an equal amount of the two New Sukuks, pro rata to the aggregate principal amount of the Existing Sukuk held by each holder immediately before the closing of the Transaction.
Lower debt servicing obligations for Company with average profit rate of 8% on lower debt amount of US$850 million:
Existing Sukuk holders will receive an average profit payment of 8% combined across the New Sukuks.
The Ordinary Sukuk will have a 9% fixed profit rate (payable quarterly in cash) and will mature on 31 October 2017. The Convertible Sukuk will have a 7% fixed profit rate (payable quarterly in cash) and will mature on 31 October 2017.
Security package has been enhanced by US$300 million of value (inclusive of security over receivables of the Company’s Egyptian assets) but is restricted to Egypt and certain UAE assets:
Both instruments will rank pari passu with each other and will be secured on an equal and ratable basis and will benefit from an enhanced security package of approximately US$300 million of value in addition to the existing security on the Existing Sukuk. The security package is restricted to Egypt and certain UAE assets.
The covenant package for the New Sukuks will be substantially similar to that in the Existing Sukuk.
The Conversion price has been set to recognise long term support of shareholders and to ensure that potential dilution remains substantially similar to current levels
At closing of the Transaction, existing shareholders will continue to own 100% of the Company’s equity. Assuming later conversion of the new Convertible Sukuk,the relative ownership of existing shareholders and the holders of the new Convertible Sukuk would be in a range similar to that in the Existing Sukuk to ensure that potential dilution remains substantially similar to current levels. The potential dilution under the terms of the Existing Sukuk is circa 21%, and potential dilution under the new Convertible Sukuk would range between 19% and 24%, depending on where the conversion price is eventually set.
The Conversion Price for the new Convertible Sukuk will be set at a 50% premium to the 75 calendar day volume-weighted average price, measured over a period commencing on 1 December, 2012, with a floor of AED 0.75 and cap of AED 1.00.
In the event that the effective Conversion Price is less than AED1.00, the economic value difference between the effective conversion price and AED1.00 shall be paid in cash at conversion, or at the Company’s option, in additional shares of the Company.
Customary adjustments of a similar nature to the terms of the Existing Sukuk would be applicable to the conversion price to reflect any applicable corporate events in the future such as new share issues, dividend payments, etc.
Conversion rights may be exercised by the new Convertible Sukuk holders at any time after 31 October 2013.
Dana Gas has the option to pay down both New Sukuks before maturity: Under the agreed terms, there is no prohibition on repaying the New Sukuks early. The Ordinary Sukuk could be redeemed prior to maturity in each of the five years of its term at premium to par that ranges from 9% to 0%. The Convertible Sukuk could also be redeemed prior to maturity at substantially similar terms to those in the Existing Sukuk documentation. The Company is also allowed to make unrestricted open-market purchases, at any point of time, of either or both the Ordinary Sukuk and the Convertible Sukuk.
Management appointments and investor relations:
There is no change in the Company’s Board of Directors. The Company will exert its best efforts to recruit the new CEO by end of the first quarter 2013, and the CFO and Investor Relations Director by the end of the second quarter 2013.
The Company will assess the possibility of an international listing of its upstream assets in due course. If it deems that this will enhance value for both shareholders and sukukholders, the Company will seek the necessary consents as part of the consent solicitation process and pursue this course of action.
Other key terms of the New Sukuks
Documentation of the New Sukuks shall be governed by English law, certain Shariah documents by UAE law, and the security documents by applicable local law, as with the Existing Sukuk.
The New Sukuks shall be listed on the London Stock Exchange or another international stock exchange, as with the Existing Sukuk.
• In order to successfully complete the Transaction, the Company will seek the consent of the shareholders, existing sukukholders, and the relevant regulatory authorities. It is currently expected that the Transaction will be completed early in the second quarter of 2013.
• The Company currently intends to schedule an extraordinary general meeting (“EGM”) in the first quarter of 2013 to request shareholder approval of the terms of the Transaction. The request to the shareholders for an EGM will be accompanied by a description of the terms of the Transaction that require such approval.
• Similarly, the Company will seek consent from existing sukukholders for the proposed Transaction at a meeting of sukukholders in the first quarter of 2013. The request for sukukholders to approve an Extraordinary Resolution will also be accompanied by a description of the terms of the Transaction.
• The Company will also, in accordance with its disclosure obligations under the ADX listing rules as well as the rules of the London Stock Exchange,keep all relevant parties informed of any material events.
• If any of the terms of the Transaction as described above are amended in consultation with, and with the agreement of the Ad Hoc Committee,such amendments will be communicated to all relevant stakeholders in accordance with all applicable laws before the consent of such stakeholders is sought for the Transaction.
• For the period from 31st October 2012 to closing, Existing Sukuk holders will receive a profit payment of 8% based on aggregate principal amount of the Existing Sukuk (payable at closing)