Ivanhoe Energy to make restructuring proposal via bankruptcy filing

By Caroline Salls

Pittsburgh, Feb. 20 – Ivanhoe Energy Inc. said it would file a notice of intention to make a proposal to creditors under the Bankruptcy and Insolvency Act (BIA) of Canada, according to a news release.

Under the notice of intention, Ernst & Young Inc. has been appointed as the trustee in the company’s proposal proceedings and will monitor and assist Ivanhoe in its restructuring efforts.

As a result of the company’s current financial situation, Ivanhoe said its board of directors decided the bankruptcy filing would be in the best interest of the company and its stakeholders.

While under bankruptcy protection, the company said it will continue with its efforts to explore strategic alternatives, including restructuring its existing debt obligations, and look to sell its assets.

According to the release, a notice of intention is the first stage of a restructuring process under the BIA, which allows the company to restructure its financial affairs through a formal proposal process.

The filing of the notice of intention also imposes an automatic stay of proceedings that will protect the company and its assets from the claims of creditors and others during the restructuring process.

Ivanhoe said the initial stay period of 30 days can be extended to a maximum six months, during which time the company will assess its ability to present a viable proposal to its creditors.

The company said it is in recapitalization discussions with various stakeholders. Strategic and financial alternatives under consideration are focused on relieving the financial burden of Ivanhoe’s current debt structure and obtaining additional financing necessary to fund ongoing operations.

As previously reported, Ivanhoe 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 the 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.

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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