Horizon Oil lifts IMC loan to $50 million, ditches entitlement offer

By Susanna Moon

Chicago, June 27 – Horizon Oil Ltd. said it has decided to upsize its subordinated secured non-amortizing loan from major shareholder IMC Investments Ltd. by $10 million to $50 million and scrap plans for an entitlement offer.

All of the other deal terms remain unchanged since the announcement on May 23.

Horizon revised its refinancing plans because of recovering oil prices and the resulting increased cash generation from its producing assets, which means less funding is needed to redeem its $58.8 million of outstanding 5.5% convertible bonds due Sept. 19, 2016, according to a company notice.

The company said the amount needed to redeem its convertibles is now about $50 million, rather than the $60 million estimated.

Given this, the company said it has decided to simplify the refinancing plans by financing the redemption with the IMC loan and from existing cash reserves instead of going through with its $20 million accelerated non-renounceable entitlement offer.

As announced May 23, interest on the IMC loan will be Libor plus 900 basis points.

The company may prepay the five-year loan at any time without penalty. IMC may demand repayment after three years.

The company will issue to IMC 300 million five-year warrants with an exercise price of 120% of the theoretical ex-rights’ price of Horizon Oil shares.

If IMC requires repayment of the loan after three years, IMC will be required to exercise the warrants outstanding, as long as the price of the shares is greater than the exercise price, and either IMC or the company may require the funds from the exercise to be offset against the loan outstanding.

The drawdown of the loan and the associated issue of the warrants will be subject to shareholder approval, which will be sought at a general meeting expected to be held in July.

Horizon Oil is a Woolloomooloo, Australia-based oil exploration and production company.

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