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06 November 2018

O, Dana

With the news that Dana Gas has launched a new three-year Sukuk, it seems that, for the most part, its previous Sukuk saga has drawn to a close.


“The company can now move forward with its exploration and development plans to evaluate and develop its world-class portfolio of assets, both in the Kurdistan Region of Iraq and Egypt,” said Dana Gas CEO Patrick Allman-Ward in a statement about the new Sukuk issuance.

After issues around the Shari’ah-compliance of its last Sukuk led to an international legal battle, however, the ramifications are still playing out, regardless of the fact that Dana Gas and its investors have come to an amicable agreement.

In a recent sitdown with Mohamed Damak, Global Head of Islamic Finance for S&P, he and I discussed how much this is affecting the investment landscape for Sukuk. Even though Dana Gas’ investors may be satisfied, the case may have driven away some investors from the Sukuk space–perhaps permanently.

“How it affects the investment landscape is going to depend on how the underlying issue is resolved. If we’re going to start to see more standardisation in Shari’ah interpretation, yes, some of the investors might come back. If we don’t, then some of the investors are gone for good. Some of them had a hard time explaining to their credit committee what happened, why the issue started, how it can be resolved, etc,” Damak told me. 

“It really scared some of the investors with whom I spoke as they didn’t understand how it can be resolved. We ended up in a situation where the judgment in London was in favour of the investors, and the judgment here was in favour of the issuer. This made things a little bit more complicated as well. In other countries, where Shari’ah is the primary source of law, that could be an issue.

This is why we think standardisation is not only desirable, but it’s what would take the Sukuk market to the next level,” said Damak.  While there have been good signs across the Islamic finance landscape on the path towards standardisation–centralised Shari’ah boards, cooperation between regulatory bodies, and more– there is still a lot more work to be done.

The point that sticks with me most, however, is that international investors are now as keenly aware of the need for this as we in the Islamic finance industry are.




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