DUBAI (Reuters) – The United Arab Emirates’ Dana Gas has appointed Citigroup and Barclays Capital as lead arrangers for a sale of at least $1 billion of convertible Islamic bonds, shareholders said on Tuesday. Shareholders approved Dana’s plan to sell the bonds at an extraordinary meeting in the emirate of Sharjah. Bond holders will have the right to convert the Islamic bond, or sukuk, into shares in the Abu-Dhabi listed company.
The approval clears the way for the launch of the bond later this month, one shareholder said. The bond will be open to buyers of any nationality, he added.
The money will be used to refinance existing acquisitions, make new buys and for general corporate purposes, he said.
Dana Gas hopes to tap growing international investor interest in the Middle East and in sukuk. The option to convert to shares may make the bond attractive to the wider investment community.
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.
Bankers’ estimates for global sukuk sales this year range from $27 billion to $50 billion, up from $10.2 billion last year, according to ratings agency Moody’s.
Sukuk comply with Islam’s ban on lending on interest and the trading of debt, and are backed by physical assets.
Dana Gas has expanded both upstream and downstream operations in the Middle East’s natural gas sector in the past seven months.
In April, the company signed gas agreements with Iraq’s Kurdish regional government, with initial investment worth $400 million. In January, Dana Gas completed the $1 billion acquisition of Canada’s Centurion Energy.
Dana Gas was established in 2005, with initial activities to include distributing gas imported from Iran under a deal between Dana Gas shareholder Crescent Petroleum and the National Iranian Oil Company.
The gas imports from the Iranian offshore Salman field in the Gulf were due to start in mid-2006, but have been delayed because Iran has yet to finish building the infrastructure for the project. The deal became controversial last year when some politicians in Iran said the gas price was too low.