Crescent refuses to provide cash for Dana Gas' debt repayment

Dubai: Crescent Petroleum, Dana Gas' biggest shareholder, has no plan to provide cash to the natural gas producer to help pay a $1 billion (Dh3.67 billion) Islamic bond due in October.

Any "speculation around Crescent injecting further capital to support the Dana Gas sukuk is incorrect," Majid Jafar, Sharjah-based chief executive officer of Crescent, said in a phone interview yesterday.

Dana Gas "is facing external macro-economic and political events outside its control" in Iraq's Kurdistan region and in Egypt, which have led to unpaid bills, and "these are the econ-omic realities that all the stakeholders need to take into account," he said.

Concern that Dana Gas will default drove up yields on the 7.5 per cent notes by 24 percentage points this month to 91.8 per cent shortly before noon, according to data compiled by Bloomberg. The company will be unable to repay the sukuk and there is high probability the liability will be reorganised, investment bank Exotix Ltd. said in a research note on May 10.

Dana Gas, in which Crescent Petroleum holds a 20.1 per cent stake, said in March customers owed $501 million to the company at the end of December, up from $255 million in 2010. Still, its profit advanced to $138 million in 2011 from $43 million the previous year, helped by higher gas production and prices.

The company produces most of its gas in Egypt and Kurdistan and political upheaval in these regions have held up payments.

Investors in Dana's sukuk hired Linklaters LLP to help negotiate a debt reorganisation, three people familiar with the matter said on May 8.