UK-based oil and gas company RockRose has made a formal approach to acquire the entire debt of its takeover target Independent Oil and Gas (IOG) owed to London Oil and Gas (LOG).
To remind, IOG rejected an all cash takeover offer from RockRose earlier this month. The terms of the proposal for IOG were that RockRose would offer 20p in cash per ordinary share for the entire issued and to be issued share capital of IOG which would value the total share capital of IOG at £26.6 million (or about $35M).
On Monday, March 25 RockRose said that it had made a formal approach for outstanding debt of IOG to Smith & Williamson LLP, administrators of LOG, on March 21, 2019.
The company added that the debt to LOG, and in turn to London Capital & Finance (LCF) – both currently under administration, would be acquired with accrued interest for the sum of £40,000,000 ($53M) in cash after making initial and enhanced offers on an informal basis during the past ten days.
The offer would provide immediate recovery of the sum together with an additional £5,380,000 ($7,12M) for accrued interest.
According to RockRose, it made formal requests for but was denied copies of the IOG Debt facility agreements and associated convertible instruments. RockRose confirmed that it did not require to conduct any diligence on IOG as a condition to the debt offer.
The company has lodged the £40,000,000 sum as proof of immediately available funds to complete the debt offer without delay.
“RockRose considers the refusal to disclose the terms of the IOG Debt as a serious impediment to RockRose in assessing its offer for the IOG Debt. […] the repeated failure of the Administrators to substantively engage with RockRose has meant that there has been no opportunity for a constructive negotiation to date,” the company stated.
This also hampers RockRose’s ability to assess the full implications of the convertible instruments on any possible offer.
“It is clear that, from the limited information that is in the public domain, the IOG Debt facilities and associated convertibles could account for more than 50% of the fully diluted equity share capital of IOG were the conversion rights to be exercised in full,” RockRose added.
LCF part of mini-bond scandal
LCF went into administration following the probe with LOG following suit as it also entered administration. Also, the UK Serious Fraud Office made arrests in connection to the failure of LCF. It is worth noting that IOG suggested that the administration of LCF would not affect LOG.
RockRose said it had made requests to regulators asking that IOG disclose its fully diluted share capital to give all parties transparency as to the position.
RockRose stated that no formal response had been received from the Administrators despite the clear pressing need to recover cash for the benefit of the creditors of LOG and LCF and, ultimately, the victims of the mini-bond scandal that led to the collapse of both LCF and, now, LOG.
“[…] in the opinion of RockRose, the possibility that IOG might default on the IOG Debt in the coming weeks absent a substantial refinancing which could potentially lead to some of the IOG debt being converted into equity in IOG which in the opinion of RockRose cannot be in the interests of the creditors of LCF, who thought they were only exposed to minimal levels of risk,” the company stated.
RockRose mulls legal action
RockRose also said: “The news on Monday that LOG has now entered into administration despite previous regulatory announcements by IOG suggesting that the administration of LCF did not affect LOG and that the SFO has made arrests this week in connection with the failure of LCF emphasizes the urgency of the need for the Administrator to engage with RockRose. RockRose are at a loss to explain the lack of engagement and are accordingly considering recourse to legal action.”
Andrew Austin, Executive Chairman of RockRose commented: “The continued lack of clarity and failure of IOG (and its direct and indirect lenders, both now in administration) to disclose the key terms of its indebtedness and the very material extent of the dilutive instruments is unusual in the current circumstances. We sincerely hope and expect that both the LCF administrator will provide feedback on our offer and that IOG will take steps to make full disclosure of the position of the dilutive instruments.”
Offshore Energy Today Staff