Seven Energy reaches agreement on comprehensive capital restructuring

By Caroline Salls

Pittsburgh, Nov. 15 – Seven Energy Finance Ltd. and its Seven Energy International Ltd. parent company reached an agreement on the terms of a comprehensive capital restructuring of the Seven Energy Group, according to a news release.

In addition to the Seven Energy entities, the parties to the agreement include Savannah Petroleum plc, lenders under Seven’s $24.1 million term loan facility and $25 million term loan facility, the holder of the company’s 10½% senior secured notes and an informal group of holders of its 10¼% senior secured notes.

Transaction terms

Under the terms of the proposed transaction and a high-level steps plan, Savannah will acquire substantially all of the valuable assets of the group, including, at its option, a strategic alliance agreement.

The assets are to be transferred to Savannah, its subsidiaries or an entity to be nominated by Savannah, subject to completion of the financial restructuring of the group.

New capital will be provided by Savannah with funding available for operational working capital and the liquidity needs of the target group, cash consideration to be paid to selected creditors, including the noteholders, and costs associated with the transaction.

The noteholders will receive their share of $52.5 million in newly issued equity in Savannah and an $87.5 million cash payment in consideration for the discharge of all $318.2 million of senior secured notes and release of claims against the entities being acquired by Savannah.

In addition, the noteholders will be offered the right to subscribe for $25 million of newly issued equity in Savannah for a total cash consideration of $20 million.

This equity issuance will be fully underwritten by VR Capital.

Noteholders who participate in the equity issuance will also be entitled to a share in a $20 million New Accugas Holdco facility for which no cash consideration will be payable to the noteholders.

Savannah may choose, in some circumstances, to exchange entitlements in connection with the Savannah equity and the equity issuance into additional cash consideration, with the subscription price minus transaction costs resulting in a net cash value of $0.96 on the dollar.

The 10½% notes will be exchanged so that the noteholder will receive $15 million of new notes issued by Accugas Holdco and $85 million of new notes issued by Seven Uquo Gas Ltd., in each case to be serviced and repaid in Nigerian Naira with extended maturities and lower debt service obligations than the existing notes.

The term loan 1 facility will be exchanged into a new $20 million facility issued by Accugas HoldCo, and the lender under the term loan 2 facility will receive $4.4 million in newly-issued equity in Savannah and a $7.3 million cash payment.

Seven Energy said the transaction will result in a significant deleveraging and re-profiling of debt facilities across the group’s capital structure.

Amendment, withdrawal talks

The company also said the group and Savannah are in discussions with other financial creditors, including the lenders under the $375 million term loan facility in favor of Accugas Ltd., regarding amendments to their financing arrangements with a view to reaching an agreement on the detailed steps required for implementation of the proposed transaction.

In connection with a Jan. 31, 2017 strategic alliance agreement termination notice, Seven Energy said it is also in talks with Nigerian National Petroleum Corp. (NNPC) and Nigerian Petroleum Development Co. (NPDC) with a view to reaching an agreement on the terms under which the notice of intention to terminate would be withdrawn.

Although Savannah and Seven Energy have agreed that the restructuring transaction will proceed on the basis that the strategic alliance agreement is not acquired by Savannah, Savannah would have the right to acquire the agreement if necessary.

If an agreement on withdrawal of the termination notice is reached, Seven Energy said it is likely that the net investment required will be up to $200 million.

Lock-up agreement

According to the release, senior secured noteholders that have not already done so are being asked to accede to a lock-up agreement to signal their agreement to the terms of the proposed transaction.

If the transaction is not implemented, and in the absence of continued forbearance and liquidity support from the group’s financial creditors, Seven Energy said some key group companies are likely to have to enter into insolvency proceedings.

If the transaction is implemented, a lock-up fee of 0.75% of the total principal amount of the senior secured notes will be paid to noteholders who join the agreement by Dec. 12.

In order to provide the group with sufficient liquidity to continue to operate its business until the transaction is completed, Savannah has agreed to provide the group with an interim revolving credit facility of up to $20 million, which will be available in three tranches.

The Nigeria-focused energy company is based in Lagos and London.

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