Ivanhoe skipping interest on 5.75% convertibles garners default notice

By Toni Weeks

San Luis Obispo, Calif., Feb. 13 – Ivanhoe Energy Inc. received a notice of default on Feb. 9 from Bank of New York Mellon, trustee under the indenture governing the company’s C$73.3 million of outstanding 5.75% convertible unsecured subordinated debentures due June 30, 2016. The notice of default demanded that the company immediately pay the C$2.1 million interest payment that was due Dec. 31.

The default occurred when Ivanhoe did not make the interest payment by Jan. 30, the date upon which the failure to make the payment constituted an event of default. The Jan. 30 due date represented a 30-day grace period the company was entitled to under the note indenture.

On Feb. 11, the company’s working capital was augmented by a $2.37 million bridge loan from company founded Robert Friedland, who also provided a $540,000 bridge loan in December and a $2.2 million loan in October, bringing the total amount of the short-term secured loan to $5.1 million.

The latest bridge loan was to be used “to satisfy current obligations, including significant statutory severance payments in Ecuador and to reduce the company’s trade payables,” according to a press release.

The company said at the time that it would make an “additional disclosure respecting the status of its strategic and financial review process once the board of directors decides to pursue a specific transaction or series of transactions,” but that “there can be no assurance that the current process will result in a transaction or, if a transaction is undertaken, that it will be successfully concluded in a timely manner or at all.”

Ivanhoe said on Jan. 28 that it was continuing to actively engage in discussions with various stakeholders to recapitalize the company. Strategic and financial alternatives under consideration were focused on “relieving the financial burden of the company’s current debt structure and obtaining additional financing necessary to fund ongoing operations,” a previous release said.

The company announced on Dec. 12 that it would not be able to make the interest payment on the convertibles and that its directors were considering various financing strategies, including selling all or part of its assets, a recapitalization, a debt restructuring or some combination of these measures.

Ivanhoe is a Vancouver, B.C.-based heavy oil exploration and development company focused on Canada, the United States and Ecuador.

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