* Deutsche to look at options-sources
* Dana says will honour obligations due in October
* Greater clarity needed from company-analyst
* Conversion of sukuk unviable, asset sales
* Shares end flat after early gains, bonds rise
(Recasts lead, adds adviser name)
By David French and Dinesh Nair
DUBAI, Jan 17 Dana Gas has
appointed Deutsche Bank to advise on its $920 million
convertible sukuk, three sources said, in a move to address
investor concern over how it will repay the Islamic bond.
The Gulf energy firm's shares have been battered by fears it
might struggle to honour the debt due in October.
A statement by the company earlier on Tuesday that it would
meet its debt obligations and that it had hired an international
adviser drew a muted response from investors.
"While today's statement from the company is certainly a
welcome change to the radio silence that prevailed recently,
holders of the sukuk are unlikely to take much reassurance from
it," said Chavan Bhogaita, head of the markets strategy unit at
National Bank of Abu Dhabi.
"Frankly, what investors want is greater clarity at the
granular level of how the company is going to raise sufficient
funds to repay or refinance this sukuk in October," he said.
Analysts believe the option to convert the sukuk into Dana
Gas shares is not viable given the stock currently trades at
0.37 dirhams while the conversion price is 1.926 per share,
leaving investors facing a potential 81 percent loss.
Both Dana's share price and the Islamic bond recovered some
lost ground after Tuesday's statement.
The Abu Dhabi-listed shares closed flat after gaining as
much as 8 percent, while the sukuk rose to 73
cents on the dollar at 1355 GMT.
Both Dana Gas and Deutsche Bank declined to comment on the
mandate when contacted by Reuters. The sources did not want to
be identified as the matter has not yet been made public.
"Dana Gas over the last four years has timely and
consistently paid on or before the due date the sukuk profit
amount and will continue to do so pursuant with its
obligations," the company said.
SHORT ON INFORMATION
Tuesday's statement came almost two weeks after a Jan. 4
board meeting which included financing options on its agenda,
following which the company only issued a brief note saying the
board had met.
"Investors were expecting to hear (after the meeting) how
Dana will deal with its 2012 maturity but nothing came out of
the meeting and that uncertainty has seen the sudden and
pronounced drop in the bond," said Thomas Christie, fixed income
trader at Rasmala Investment Bank.
Analyst calls, only started by Dana Gas for the third
quarter of 2010, stopped after it reported first-quarter numbers
last year. Its head of investor relations, left on Dec. 8, a
note from distressed-debt trader Exotix, published Jan. 8, said.
Dana, the Gulf's only listed natural gas firm, had 418
million dirhams ($114 million) cash, according to its
third-quarter results, while Exotix said it has $260 million of
potential internal liquidity available.
A second banker said Dana was eyeing a number of options for
its $920 million sukuk.
Last year, Dana proposed listing some of its assets on the
London Stock Exchange and sources close to the matter said the
company was still looking to do so this year, although they
would not proceed if market conditions were unfavourable.
"In order to do an IPO, they need to fix the problem first,"
the London-based banker said. "You could not IPO a business if
there is no clear route to a solution for that (sukuk)
Asset sales are also being considered.
Dana Gas has a 3 percent stake in Hungarian group MOL
, worth around 55.2 billion forints ($225 million).
Potential sales of businesses in Egypt and Kurdistan are
also fraught with political risk, which would hit the price.
Dana Gas's chief executive told Reuters in September the
company was owed around $200 million by Egypt.
It said on Tuesday it was continuing to have "constructive
discussions" with the government over delayed payments from
state-owned entities in the country.
Dana, whose third-quarter profit more than quadrupled, was
expected to post a 151 million dirhams profit for the fourth
quarter, a 156 percent rise, according to Global Investment
($1 = 245.5278 Hungarian forints = 3.6730 UAE dirhams)
(Additional reporting by Mirna Sleiman, Mala Pancholia; Editing
by Amran Abocar and David Cowell)