Afren completes key recapitalization plan steps; payments deferred

By Caroline Salls

Pittsburgh, April 30 – Afren plc has completed key steps in its recapitalization plan to address its funding requirements and operational repositioning, which the company said will allow it to succeed in the current oil price environment.

According to a news release, the plan includes $255 million of net total funding to be provided by bondholders, with the ability to increase such net funding to $305 million.

Afren said arrangements for the provision of $200 million in net interim funding provided by bondholders have been completed. The remaining committed $55 million will be provided at closing, which is expected to be in July.

The interim funding is being provided in the form of super senior private placement notes (PPNs), which the company said have been issued to the participating noteholders.

These funds will be used to fund core Nigerian producing assets, as well as to pay existing creditors built up during the group’s liquidity squeeze.

These steps set “new Afren” on a path to address the operational and governance issues it has faced and ensure it can successfully reposition itself focused on its core Nigerian producing assets, the release said.

“The strong support shown by key stakeholders ensures we can now progress a number of important development projects in Nigeria, which will contribute early production and revenue to the business and support our aim to be profitable in a lower oil environment,” new chief executive officer and executive director Alan Linn said in the release.

“There is a lot to do. However, the core assets and the quality of people and partners I’ve met give me the confidence to say that Afren has an attractive future.”

Following Alan Linn’s appointment as CEO, the company said Toby Hayward will be stepping down as interim CEO and will continue as an independent non-executive director. In addition, new directors will be appointed to broaden the company’s expertise. Afren said an executive search firm is being retained to assist with this process.

Facility payments deferred

In conjunction with the noteholder funding agreement, the company said the lenders under the Afren group’s existing $300 million Ebok credit facility have agreed to the deferral of the $50 million amortization payments due on Jan. 31 and April 30 until the completion of the implementation of the recapitalization, at which point the payments are expected to be further deferred until after the repayment of the new senior notes.

The implementation of the recapitalization is subject to entry into and completion of further documentation and formal approval by the participating noteholders and each of the lenders under the group’s $300 million secured Ebok facility.

Shareholders will also be asked to approve the issue of new shares in connection with the recapitalization. If shareholders do not approve the issuance, the recapitalization will still proceed, but on amended terms.

Subscription agreement

In connection with the recapitalization, the company said it has entered into a conditional subscription agreement with the participating noteholders for the issuance of $274 million high-yield notes.

The issuance will be used to refinance the PPNs and provide an additional $55 million in net cash proceeds to the group.

In accordance with the provisions of the subscription agreement, the company said it is seeking additional commitments from other holders of the 2016 notes, 2019 notes and 2020 notes to subscribe for additional new senior notes to increase the principal amount of the new senior notes to $325 million and thereby receive up to $305 million of net cash proceeds.

Recapitalization amendments

As a result of the changes in the principal amount of new senior notes and the fact that the recapitalization is now expected to be complete by the end of July, the following amendments are being made to the key terms of the recapitalization:

• The amount of principal and accrued but unpaid interest due on the 2016 notes, 2019 notes and 2020 notes to be repaid is expected to be about $934 million, as compared to $920 million.

Afren said 25% of that amount will be converted into ordinary shares representing 80% of the increased share capital of the company immediately following such conversion, and the remaining existing notes will be reinstated into two equal tranches of $350 million with a maturity of December 2019 and December 2020, respectively;

• To the extent the total amount of new senior notes subscribed is less than $320 million, the amount of new ordinary shares to be issued to subscribers will be reduced from the previously announced 50% of the total issued share capital following the debt-for-equity swap.

If the new senior notes are not issued by July 22, the number of new ordinary shares to be issued to subscribers will increase by 0.1205% per day until the date of issue of the new senior notes;

• The amortization profile under the Ebok facility will be amended so that no amortization payments will be made until the earlier of Sept. 30, 2018 and the new senior notes being repaid, and the fixed quarterly amortization payments will be increased to $15.6 million, rising to $27.2 million;

• The lender under the $50 million secured facility in respect of Okwok/OML 113 has agreed to extend the term of that facility until June 2018, with $20 million of amortization payments due by March 2016 and the balance being amortized through equal quarterly payments until June 2018. The interest rate under this facility will remain at 9˝%, but the lender will receive a fee equal to 1˝% of the facility, payable in kind at the maturity of the facility; and

• If the recapitalization is not approved by shareholders at the general meeting, the existing notes will be amended and reinstated into $350 million notes due 2019, $350 million notes due 2020 and $233 million notes due 2021; the principal amount of the new senior notes issued to the existing noteholders who subscribe will be increased to $302 million, the interest payable on the new senior PIK notes will be reduced to 2˝% from 2.7%, and the interest payable on the new junior PIK notes will be increased to 26.9% from 26.8%.

If the proposed open offer of new shares to shareholders is subscribed in full by existing shareholders only, existing shareholders will hold up to 14% of the fully diluted share capital of the company.

Afren is an oil and gas exploration and production company based in London.

© 2015 Prospect News.
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