Oro Negro bondholders adopt informal group’s restructuring proposal

By Caroline Salls

Pittsburgh, Sept. 12 – The holders of Oro Negro Drilling Pte. Ltd.’s 7½% senior secured bond issue 2014/2019 approved a restructuring proposal put forward by an informal bondholders group, according to a notice released by bond trustee Nordic Trustee ASA.

The bondholders group said the proposal is substantially similar to the one it announced on Aug. 11, except that the approved proposal now includes an amendment that allows Oro Negro to establish an all-cash management incentive plan.

Also under the amendments to the bondholders’ proposal, immediately after the release of funds from an issuer debt service account to fund interest payments, 100% of the remaining amounts in that account will be applied to reduce the principal amount of the bonds outstanding.

The amended proposal also inserts a clause that requires the company to maintain $5 million of minimum liquidity.

The terms of the amendment must be agreed upon between the company and holders of at least 50% of the outstanding principal amount of the bonds.

Pemex requests amendments

As previously reported, the proposal supported by the bondholders group resulted from a Petroleos Mexicanos (Pemex) request for a series of amendments to Oro Negro’s 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.

The bondholder group said it believes the bondholder proposal will allow the company to implement the Pemex proposal while maintaining the uninterrupted operational performance of the affected drilling rigs.

Bondholder proposal

Under the bondholder proposal, a cash sweep mechanism would be included in the bond agreement, whereby 100% of the excess cash flow calculated on a monthly basis would be contributed to the issuer debt service account as soon as reasonably possible following receipt of any revenues or factoring proceeds from all drilling contracts.

The cash flow sweep would have a fixed duration of two years.

Additionally, the bondholder proposal states that the company’s annual budget would be amended, and operating, maintenance and repair expenses would not exceed $50,000 per day per rig.

Nordic Trustee said in a separate notice that the bondholder group’s resolution was adopted by 100% of voting bondholders.

Company terms rejected

On Aug. 29, the bondholder group announced that it rejected a restructuring proposal submitted by the company in favor of the Pemex proposal.

“The company proposal is not a viable restructuring proposal as there is no justification for holders of the bonds to undertake a material debt-for-equity conversion given the company’s current financial and operational condition, including the ad hoc group’s support for the latest proposal of Petroleos Mexicanos concerning certain amendments to the drilling contracts between the company and Pemex for the Primus, Laurus, Fortius, Decus, and Impetus rigs,” the bondholder group said in an Aug. 29 letter.

The company said it 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.

Oro Negro is an oil and gas services company based in Alvaro Obregon, Mexico.

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