Iona calls bondholder meeting to approve refinancing of 9½% bonds

By Toni Weeks

San Luis Obispo, Calif., July 30 – Iona Energy Inc. is seeking bondholder approval of a proposal to refinance its 9½% senior secured callable bonds due 2018, according to a notice from bond trustee Nordic Trustee ASA.

On March 27, bondholders had approved a series of amendments and waivers to increase financial flexibility for the company, as previously reported.

The company was in breach of the bond covenants as of Dec. 31 and would also have been in breach at March 31 had it not secured the amendments. Without the waivers, the consecutive quarterly breaches would have resulted in a default under the terms of the bonds, which could have required immediate repayment of the bonds.

Under the terms of the amendments, the company was obligated to conduct a review before June 30 to consider all options to enable funding of the Orlando project to achieve first oil by Dec. 31, 2016 and/or a refinancing of the bonds.

During the review, Iona considered numerous potential transactions and combinations thereof and decided that the proposal to be voted on represented the best alternative available for the company to achieve its objectives. The proposal, if implemented, would ensure that the company is fully funded for its Orlando project. Failure to implement the proposal by Sept. 30 will likely result in a default under the bond agreement and will likely lead to liquidation and/or insolvency of the Group, the notice said.

The company said in June that it had received unanimous written support from an ad hoc committee of bondholders, representing 64% of its outstanding senior secured bonds, for the proposal.

The key terms of the proposal include the following:

• The sale of a 25% working interest in the Orlando asset in consideration for payment of the company’s share of the development costs for the Orlando oil field up to $25.5 million, plus additional cash payments to the issuer after first oil at the Orlando asset;

• The provision of deferred payments or loans of an estimated $33 million, repayable in installments within nine months following first oil;

• A cash repayment to bondholders of $24 million on the outstanding bond debt on the restructuring implementation date;

• A reduction of the outstanding debt under the bond to $120 million with effect from the restructuring implementation date, and the swap of the outstanding bond debt exceeding $120 million in exchange for Iona common shares representing 87% of the issued and outstanding common shares as of the restructuring implementation date; and

• The ability for the issuer to use $31 million of the restructured funds currently held in the escrow account to achieve first oil at the Orlando asset.

A bondholders’ meeting will be held on Aug. 6 in Oslo. To approve the proposal, bondholders representing at least two-thirds of the bonds represented in person or by proxy at the meeting must vote in favor of the resolution. In order to have a quorum, at least half of the voting bonds must be represented at the meeting.

Iona issued $275 million of the senior secured bonds on Sept. 27, 2013 through its U.K. subsidiary, Iona Energy Co. (UK) plc.

Iona is a Calgary, Alta., oil and gas company with assets in the United Kingdom’s North Sea.

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