DUBAI
The owners of Islamic bonds issued by Abu Dhabi-listed Dana Gas have gone to London’s High Court of Justice to try to overturn an injunction that prevents them from forcing repayment of the $700 million of sukuk.
Analysts say the case could have ramifications across the Islamic finance industry, with any decision against the creditors potentially undermining confidence in Islamic bonds.
Dana Gas argues that because of changes in Islamic financial instruments and how they are interpreted, its sukuk are no longer Sharia-compliant, and have become unlawful and unenforceable in the United Arab Emirates.
The company says it is therefore halting payments on the mudaraba-style sukuk and proposing its creditors exchange them for new Islamic bonds with lower profit distributions.
in mid-June, Dana Gas said it had obtained an interim injunction from London’s High Court blocking holders of the sukuk, which are due to mature in October, from enforcing claims against the company related to the bonds.
Deutsche Bank, representing the sukuk holders, told the High Court on Tuesday the injunction should be set aside, according to legal documents presented to the court and seen by Reuters.
Deutsche Bank told the court Dana’s case was “hopeless as a matter of law,” arguing that asserting the sukuk were illegal was an “event of default” allowing the sukuk holders to demand repayment, the documents show.
Dana’s actions “have sent shock waves around the market for Islamic bonds” because they could erode trust in other sukuk issues, Deutsche Bank said.
The judge did not reach a conclusion on Tuesday, and had asked Dana and the other parties to return to the court on Wednesday, a source familiar with the situation told Reuters.
