IGas Energy accepts $49.2 million of bonds in offer for cash

New York, March 31 – Igas Energy plc said that it will buy back $49.2 million of secured bonds in the cash portion of its offers to restructure its debt.

Holders had tendered $71.4 million principal amount of bonds in this part of the offer after adjustment for the mandatory equity exchange.

Settlement of the cash offer is conditional on completion of the restructuring and is expected to take place on April 7.

IGas said that because the minimum cash cancellation level of $49.2 million has been met there will be no conditional cash cancellation.

The company previously announced on March 24 that it received and planned to accept offers for $28,918,390 principal amount of secured bonds in the voluntary equity exchange.

Settlement of this portion of the transactions was expected to occur around April 7.

The secured bonds will convert to equity at 100% of par.

Because the $39,999,999 minimum conversion threshold was not met, $11,081,609 principal amount of secured bonds will be converted into new ordinary shares of the company under the conditional secured debt for equity swap if the restructuring is completed.

The secured bond cash cancellation minimum for the voluntary cash offer is $30 million, because the secured bond conversion minimum was not reached.

Background

On March 17, IGas reported it had received backing for its capital restructuring from about 75% of the secured bondholders and about 61% of the unsecured bondholders.

The company said on March 10 that it would breach its bond liquidity covenants in late March unless the revised restructuring went through.

At that time it had the support of 66 2/3% of the secured bondholders and about 40% of the unsecured bondholders.

IGas also said it closed a placement of $55 million from a subscription by new investor Kerogen, a placement of shares with institutional investors and a subscription by some of the directors.

As part of the restructuring, the company said it would hold a debt for equity swap for all of the unsecured bonds through a bondholder vote as well as the debt for equity swap for some of the secured bonds through a voluntary equity exchange or bondholder vote.

The unsecured bonds will convert to equity at 62.5% of par.

IGas renegotiated a set of terms, conditions and covenants for the secured bonds remaining after the debt for equity swap and cash repurchase, which would help the company “to operate on a sustainable basis and advance the business with lower levels of financial constraint,” according to a company update.

The company’s overall net debt will be reduced to no more than $10 million from $122 million as of Dec. 31 though the cancellation of all of the unsecured bonds through a bondholder vote; cancellation of up to $60 million of secured bonds in exchange for the issue of new shares through a voluntary equity exchange or bondholder vote; and cancellation of part of the secured bonds following a repurchase in exchange for cash payments through a voluntary cash offer and/or a bondholder vote, the company noted.

In the exchange, the unsecured bondholders also will agree to waive accrued interest.

All unsecured bonds held by the company will be canceled for no payment.

The exchange rate is 1.2167, which is the closing exchange rate on March 9.

All secured bonds held by the company will be canceled.

If the conversion minimum is not reached, the company previously said it may secure the repurchase and cancellation of the remaining secured bonds on a pro rata basis in an amount equal to the shortfall with the approval of at least 66 2/3% of the voting bonds represented at a bondholder meeting.

To the extent that the principal amount of secured bonds offered exceed the cash cancellation minimum and would not require more than the excess cash amount, the company said it will accept offers in full.

Otherwise, the company will accept the additional offers in full or in part up to the excess cash amount and will decide whether to accept the offers.

In the bondholder vote, there will be pro rata allocation to the extent the secured bond cash cancellation minimum is not met in the voluntary cash offer, which requires votes for at least 66 2/3% of the voting bonds represented at a meeting.

Amendments to secured bonds

The rest of the secured bonds would be amended by way of bondholder resolution as follows:

• Term extended to June 30, 2021;

• Interest of 8% per year, effective March 23;

• Amortization on year one of 2.5% outstanding principal amount at completion payable on Sept. 22, 2017 and March 22, 2018;

• Amortization beginning in year two of 5% outstanding principal amount at completion payable semiannually;

• Repayment in full at maturity with the outstanding balance repayable at maturity;

• Amortization suspended if Brent Crude oil price is less than $50 per barrel;

• Minimum liquidity covenant of $7.5 million;

• Leverage covenant with ratio of no more 3.5x;

• No other financial covenants;

• Debt service retention account removed and amounts released to company;

• Amendments to change-of-control put option to allow Kerogen Capital to hold more than 30% of the common shares in the company;

• All prepayment premium to be removed and prepaid amounts to be applied in order of maturity; and

• Mandatory offer for disposal proceeds to be set at a threshold of $20 million with 50% of net proceeds in excess of this to be offered to the secured bondholders for redemption.

For the secured bonds, interest accrued up to March 22 and amortization amount to be paid in full in cash.

Interest accrued after March 22 will be waived for the secured bonds canceled after the debt for equity swap or cash offer.

The bondholder transactions must be approved by at least of 66 2/3% of the voting secured bonds and of 66 2/3% of the voting unsecured bonds. To form a quorum, at least 50% of the secured bondholders and 50% of the unsecured bondholders must be represented at the bondholder meeting.

IGas is a London-based onshore hydrocarbon producer, delivering natural gas and crude oil to Britain’s energy market.

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