Interoil asks holders to approve restructuring of outstanding bond

New York, Jan. 6 – Interoil Exploration and Production ASA announced a bondholders’ meeting that will be held on Jan. 20 to seek authorization to restructure the company’s current bond loan.

Interoil is proposing to convert NOK 7.15 million of the NOK 310 million bond into 65 million shares, around 10% of the company’s equity.

The remaining outstanding amount will be converted into a new bond loan denominated in dollars.

Under the proposed terms, the new bond will pay interest at 6% in cash or 8% in kind. In-kind payments will only be allowed for the first two years.

The bond will mature in five years and will be callable immediately at a price of 105.

The terms will not restrict bank refinancing in Colombia but will prevent financial support from Interoil Colombia Exploration and Production Inc. to other entities, except Interoil’s Norwegian entities.

After the restructuring, the new bond will have a principal amount of $32 million. Of this $30 million will be issued to existing bondholders and the remaining $2 million will be held by the former shareholders of Proseis AG, to be issued in exchange for debt Interoil owes to Proseis.

The meeting will be held at 3 a.m. ET on Jan. 20. An extraordinary general meeting of shareholders will be held later on the same day.

Interoil’s bondholders previously approved a three-month deferral of the interest payment that had been due on Dec. 14.

Subsequently Interoil announced the restructuring proposal on Dec. 23.

In addition to the debt exchange, Interoil will also issue NOK 36.3 million of equity to Andes Energia plc, a Latin American company involved in exploration, development and production of conventional and unconventional oil and gas resources.

The private placement will trigger an obligation for Andes to launch a mandatory offer for the remaining shares of Interoil.

Interoil explained that the restructuring is necessary because it is “suffering from a heavy debt burden.”

As a result, the company is unable to carry out initiatives which would protect and potentially increase the value of its assets.

In addition, it anticipates its Colombian subsidiary will be unable to meet its commitments this month.

Announcing the restructuring in December, chief executive officer Thomas Fjell said: “We are pleased to announce a solution which will entail that Interoil is supported by an industrial owner with significant presence and competence in Latin America.

“We have worked intensively on a wide range of potential transactions over the last year. The alternatives have included strategic opportunities, capital raise and discussions with parties interested in selected assets and in the shares of the company. The proposed solution stands out as the best alternative.”

InterOil is an Oslo-based exploration and production company.

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