DUBAI — United Arab Emirates-based Dana Gas has postponed pricing its $1 billion convertible Islamic bond until September due to global credit market weakness, the company said in a statement yesterday.
Dana is the latest company in the Gulf Arab region to see bond plans hit as problems with US subprime mortgages ripple through world credit markets.
Abu Dhabi-based First Gulf Bank postponed its $3.5 billion eurobond programme two weeks ago. Bahrain's Ithmaar Bank followed, delaying a $300 million sale of five-year Islamic bonds.
"In the light of the extreme weakness currently being experienced in the global credit markets, Dana Gas has been advised by Barclays Capital and Citigroup to postpone the pricing of its equity-linked sukuk offering until September," said Dana Gas Executive Chairman Hamid Jafar in the statement.
Citigroup and Barclays are lead arrangers for the bond. Dana had planned to price the bond this week after launching the issue in mid-July.
Dana hopes that credit market volatility will have subsided in September. The bond had been well received in Europe, the Middle East and the Far East, it said.
The world's largest gas company, Russia's Gazprom, decided not to price its 30-year benchmark dollar Eurobond on Thursday due to market volatility.
"If the biggest player in the gas industry delays its offering, why on earth would an up and coming player want to be in the market," a source familiar with Dana's planned bond issue told Reuters.
"It would be foolhardy to advise a company to price in this market. Investors are interested in Dana's growth story. It will be better to come back and hit them with it in September."
Sales of Islamic bonds, or sukuk, have surged in the last year as more of the world's 1.2 billion Muslims seek investment vehicles that comply with their beliefs. Sukuk comply with Islam's ban on lending on interest and the trading of debt, and are backed by physical assets.
But expectations for a bumper summer of sukuk issues in the region have been dampened. The subprime worries have made investors more averse to risk, widening spreads on many bonds, especially in emerging markets, and making borrowing more expensive.
When the debt issue goes ahead, Dana plans to use the money to finance existing acquisitions, make new buys and for general corporate purposes.
The option to convert to shares may make the bond attractive to the wider investmen