Oro Negro does not support bondholder group’s restructuring proposal

By Caroline Salls

Pittsburgh, Sept. 14 – Oro Negro Drilling Pte. Ltd. said it does not support a restructuring proposal put forward on Sept. 12 by an informal group of holders of its senior secured bond issue 2014/2019.

According to a news release, the bondholder group’s written resolution to support the proposal is not binding on the company, does not obligate it to take any actions and does not modify the bond agreement in any way.

Oro Negro said the proposal it previously made available to all bondholders is intended to create a sustainable balance sheet while providing existing bondholders with a fixed-value component at a premium to current market value and expected valuation under alternative scenarios.

The company said its proposal also allows bondholders to retain their senior position in the capital structure with significant downside protection and the potential to benefit from any upside.

As previously reported, the bondholders group said its 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.

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.

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

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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