Afren, a cash-strapped, London-listed independent oil and gas company, with assets in Africa, has decided at the expiration of the 30 day grace period, not to pay US$15m of interest which was due on February 1, 2015 under its 2016 Notes.
Afren has said it has opted for this move in light of the Company’s current liquidity position and in order to preserve cash while the review of the Company’s capital structure and funding alternatives is completed. As at 9:01 CET the company’s shares were down 45% at 5 pence.
While such non-payment will result in a default under the 2016 Notes, Afren has said this will not result in an immediate obligation to repay such 2016 Notes or any cross-default under its 2019 Notes or 2020 Notes or its other debt facilities.
Read below a statement by Afren:
“The Company has received assurances from the ad hoc committee (which members hold in aggregate approximately 55% of the principal face amount of the 2016 Notes and 44% of the total principal face amount of the 2016 Notes, 2019 Notes and 2020 Notes) that the committee has no current intention to take enforcement action with respect to the 2016 Notes held by its members as a result of the failure to make payment of interest due under the 2016 Notes, in the hope and expectation that agreement can shortly be reached with the Company and its key stakeholders on the terms of a consensual restructuring that would preserve the Group and its business as a going concern for the benefit of all stakeholders.
“…the Board believes that an agreement between the Company’s creditors presents the most likely solution to the immediate issues facing the business.”
The Company is continuing constructive discussions with the advisers to, and members of, the ad hoc committee of its largest bond holders, the coordinating committee of the lenders under its US$300m Ebok debt facility and its other lenders regarding the immediate liquidity and funding needs of the business. It is expected that any agreement with the Company’s bond holders and debt providers regarding the provision of interim and longer term funding and a broader consensual restructuring is likely to result in economic terms associated with the new funding and/or the issue of new equity which will substantially dilute the interests of the Company’s current shareholders.
While the Company is also having discussions with its other stakeholders and third party investors regarding interim funding and recapitalising the Company, the Board believes that an agreement between the Company’s creditors presents the most likely solution to the immediate issues facing the business. There can be no certainty that an agreement will be reached. Further announcements will be made in due course.”
Afren had been in take over discussions with Nigerian oil company Seplat, but decided to pull out of the talks after Seplat’s several delays to put a bit on the table. According to internet reports, China’s Fosun Group might be interested in Afren too.
Also, on Monday, March 2, 2014, Afren said it had obtained from the lenders of the US$300m Ebok debt facility a further deferral of the US$50m amortisation payment due on January 31, 2015 until March 31, 2015.