Executive Summary
Dana Gas recently declared that it had received legal advice on its USD 700mn sukuk, maturing in October 2017, were not shariah compliant and hence has become unlawful in the UAE. The company subsequently has stopped payments and proposed that creditors exchange the sukuk for new Islamic instruments offering profit distributions that could be less than half those of the existing one. This has raised concerns that the other sukuk issuers too could pursuit similar path of breaching the obligations on the pretext of the instrument being non-shariah compliant. The current Dana Gas imbroglio can impede a growing sukuk market where issuances across core markets reached USD 40bn in 2016, up from about USD 32bn in 2015.
