Mexico’s Oro Negro presents restructuring proposal to 7½% noteholders

By Caroline Salls

Pittsburgh, Aug. 28 – Oro Negro Drilling Pte. Ltd. presented a debt restructuring proposal to holders of its 7½% senior secured bond issue 2014/2019, according to a news release.

The company said the proposal addresses a series of amendments requested by Petróleos Mexicanos (Pemex) to the drilling contracts for the Primus, Laurus, Fortius, Decus and Impetus rigs operated by Oro Negro Drilling affiliate Perforadora Oro Negro, S de RL de CV.

In light of the permanent nature of proposed changes and the need to create a sustainable capital structure, Oro Negro said it is proactively exploring ways to restructure its debt obligation.

While it is in negotiations with Pemex on definitive documentation to ensure the proposed terms are accurately reflected in the amendment, the company said these changes are not in the best interest of Oro Negro without permanent changes to its capital structure.

According to the release, Oro Negro designed a proposal to exchange its existing senior notes for a package of new securities, including new senior notes, new preferred equity, new common equity, cash and the Primus rig.

Specifically, holders of existing notes will receive a share of $300 million of 8¼% senior secured notes due five years from the closing date, $150 million of new preferred equity with a 12% coupon with a payment-in-kind toggle function and a maturity date of six years from closing, the transfer of the Primus rig or the economic interests related to the rig, $30 million in balance sheet cash and 10% of the new common equity.

The new preferred equity is payable in cash or in kind at the company’s option, Oro Negro may redeem the preferred equity at par with no pre-payment penalty on an annual basis beginning in December 2018. The preferred equity terms also include cash interest and an optional redemption subject to maintaining a $20 million minimum cash balance.

The company said the exchange package is intended to create a sustainable balance sheet, while providing existing senior noteholders with a fixed value component at a premium to current market value and allowing bondholders to retain their senior position in the capital structure with significant downside protection and the potential to benefit from any upside.

Holders of existing equity will receive 90% of the new common equity.

Governance of the company will remain the same, provided that the holders of the new preferred equity may appoint one board member.

Timing of the transaction is yet to be determined.

Oro Negro said it is looking to meet with bondholders to discuss the proposal.

The oil and gas services company is based in Alvaro Obregon, Mexico.

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