posted by Christopher W. Holton
Here we see illustrated a real pitfall of Shariah compliant finance.
Dana Gas of Abu Dhabi previously issues $700 million worth of Shariah bonds, also known as sukuk. Now, the firm is informing creditors that its sukuk are actually NOT shariah compliant and is proposing that they be traded for a new shariah-compliant issue.
Not surprisingly, there is a lack of trust between the various parties at this point.
Who knows what is at work here?
If the issue is indeed not shariah compliant, why wasn’t this known before? Who knew what and when did they know it?
It would also seem that having an issue declared not shariah compliant is a great way for a borrower to escape or delay responsibility for its obligations.
None of these specific hazards exist in a conventional transaction.
Note also that New York firms such as Houlihan Lokey and Moelis are up to their eyeballs in this mess.
You lay down with dogs, you get fleas.