Pacific Exploration gets forbearance for 5 3/8% notes, 5 5/8% notes

By Susanna Moon

Chicago, Feb. 19 – Pacific Exploration & Production Corp. said it secured forbearance until March 31 from holders of its 5 3/8% senior notes due 2019 and its 5 5/8% senior notes due 2025.

Pacific Exploration reached an agreement with some holders of its 5 3/8% notes and some holders of its 5 5/8% notes due 2025, in which the noteholders have agreed to forbear from declaring the principal and additional amounts due and payable until March 31, according to a company press release.

The forbearance is for the interest payments due Jan. 19 for the 2025 notes and Jan. 26 for the 2019 notes.

The noteholders hold about 40% of the $4.1 billion principal outstanding amount of notes issued by the company, including 2019 notes and 2025 notes, and are being advised by Evercore Group LLC (U.S.), Goodmans LLP (Canada) Paul, Weiss, Rifkind, Wharton & Garrison LLP (U.S.) and Cardenas y Cardenas Abogados (Colombia).

If the company failed to pay the interest by Feb. 19, the failure would have constituted events of default under the note indentures. But, under the terms of the extension agreement, holders of about 34% of outstanding 2019 notes and 42% of outstanding 2025 notes have agreed to forbearance.

Similarly, under terms of lender forbearance agreements, some of the company’s lenders will agree to forbear from declaring the principal amounts of credit agreements due and payable as a result of defaults during the extension period.

The company said it plans to use the extension period to work with its creditors to form a comprehensive plan to address the oil price environment and to ensure the long-term viability of its business.

The company said it will stay current with its suppliers, trade partners and contractors. Normal operations continue in Colombia and the other jurisdictions within which the company operates, the release noted.

The noteholder extension agreement will become effective after the required bank lenders have approved to the lender forbearance agreements.

The company is being advised by Lazard Freres & Co. LLC, Norton Rose Fulbright Canada LLP (Canada), Proskauer Rose LLP (U.S.), Zolfo Cooper (U.S.) and Garrigues (Colombia). The independent committee is being advised by Osler, Hoskin & Harcourt LLP.

“The extension should allow the company additional time to continue working with the independent committee of the board of directors, the company’s financial and legal advisors as well as its lenders and the noteholders to come to a consensual and comprehensive restructuring of the company’s balance sheet,” Ronald Pantin, the company’s chief executive officer, said in the press release.

Loan forbearance, recent news

The company said it is in the process of entering into forbearance agreements for its $1 billion revolving credit and guaranty agreement with Bank of America, NA as administrative agent; $250 million credit and guaranty agreement with HSBC Bank USA, NA as agent; $109 million credit and guaranty agreement with Bank of America, NA as lender; and $75 million master credit agreement with Banco Latino Americano de Comercio Exterior, SA as lender.

The steering committee formed by the syndicate of lenders under the revolving credit agreement is being advised by FTI Consulting (U.S.), Davis Polk & Wardwell LLP (U.S.), Torys LLP (Canada) and Gomez-Pinzon Zuleta Abogados (Colombia).

As reported Feb. 12, an informal committee of noteholders raised concerns about the terms of a revised tender offer from EIG Pacific Holdings Ltd.

The committee said its members hold about 40% of the $4.1 billion principal outstanding amount of the company’s notes.

Pacific Exploration is a Toronto-based explorer and producer of natural gas and crude oil, with operations focused in Latin America.

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