Niko gathers consents to begin strategic plan; solicitation goes on

By Susanna Moon

Chicago, June 24 – Niko Resources Ltd. said it has secured enough consents to amend its 7% senior unsecured convertible notes due Dec. 31, 2017, which is needed to carry out its strategic plan.

Niko expects to enter into an amendment to the senior term loan facilities agreement with its institutional lenders and take other steps as needed to begin its strategic plan, according to a company update.

The solicitation will continue until 6:30 p.m. ET on July 11.

The company said on June 10 that it could implement the plan beginning June 17 after it received sufficient consents.

Holders who deliver consents will share in the $1.5 million consent fee and will be eligible even if Niko has implemented the plan.

The company announced on March 24 that it planned a consent solicitation, and before that it said it had executed a support agreement with institutional lenders holding 85% of its senior term loan facilities and a support agreement with holders of 60% of the notes.

The agreement releases the company from the requirement to make interest payments on its debt for a hold period that it is expected to be at least two years and extends the debt maturities to Dec. 31, 2025.

Niko said that the relief will allow it to execute its strategic plan of maintaining its core assets until the value of the assets “can be enhanced for the benefit of all the company’s stakeholders.”

The company added that it believes it will have the liquidity to fund the cash requirements of its operating subsidiaries in India and Bangladesh and its corporate general and administrative expenses during the hold period.

For the proposed amendments to become effective, Niko must have approval of its board – which has already been given – of the Toronto Stock Exchange, of all the lenders on the term loan and of 66 2/3% of the principal amount of the convertibles, either by written resolution or through a consent solicitation or alternatively of the amount present at a meeting of noteholders. Niko said when it announced the agreements on March 14 that it planned a consent solicitation.

Niko received conditional approval from the Toronto Stock Exchange on April 6 subject to issuance of a press release – a requirement that the company believes has now been met – and delivery of documentation.

The record date for the solicitation is 5 p.m. ET on March 29.

Under the terms of the agreements, the term loan lenders may at any time after the second anniversary of implementation give 90 days’ notice that they will require the company to commence a marketing and sale process for its interest in the D6 production sharing contract. The lenders can require this to happen earlier than two years if the company fails to maintain a minimum cash balance of $5 million or if the D6 contractor group decides to commit to capitalizing new development projects. The company may start the sales process at any time.

The agreements will extend the waiver of certain financial covenants and undertakings under the term loan and the waiver of certain covenants under the note indenture during the hold period.

Cash interest payments will be waived and will instead accrue at the current rates of 15% for the term loan and 7% for the notes.

The term loan lenders will be entitled to additional PIK interest at the rate of 6% on a notional principal amount of $168 million.

Niko Resources will make a $12 million paydown on the term loan on the implementation date.

The required minimum cash balance of a reserve account specified in the loan agreement will be cut to $10.3 million from $20 million.

Proceeds from any transactions including asset sales, settlements of insurance, arbitration and/or tax claims, excess operating cash above an agreed cash flow forecast and the like will be first used to repay the $168 million of the term loan, then PIK interest to the term loan lenders of $12 million. The next $100 million will be paid 62.67% to the loan lenders and 29.33% to the noteholders with the remaining 8% to be retained by the company.

Lenders and noteholders will each receive 40% of the next $120 million, the company retaining 20%.

Any further proceeds will be distributed at the rate of 20% each to lenders and noteholders, the remaining 60% to be retained by the company.

The term loan agent will receive a preferred share giving it one vote, the right to appoint up to two nominees to the board, an annual preferential cumulative dividend, if declared by the board, of 0.00001% per annum on the redemption price of $1.00, and a distribution of capital of $1.00 in priority to the holders of the company’s common shares in the event of the liquidation, dissolution or winding-up of the company.

Calgary, Alta.-based Niko Resources is an oil and natural gas exploration and production company with operations in India, Bangladesh, Indonesia, Madagascar, Pakistan and Trinidad.

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