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Afren share price sinks following unveiling of bond-to-equity recapitalisation plan

13th March 2015

Afren is to recapitalise itself by USD 300m with the issuance of bond-to-equity notes to its existing bond holders – scuppering hotly rumoured takeover rumours and slashing the value of its shares by over 15 per cent in early morning trading

Afren is to recapitalise itself by USD 300m with the issuance of bond-to-equity notes to its existing bond holders – scuppering hotly rumoured takeover rumours and slashing the value of its shares by over 15 per cent in early morning trading
The company has urged its shareholders to approve the deal, warning that failure to do so could lead to them losing the entire value of their investment. Source: Afren plc

Afren, the beleaguered Nigeria-focused exploration nd production company, has decided to seek refinancing through an agreement with its current creditors rather than from a third party.

The plan will result in existing shareholders holding only approximately 11 per cent of the fully diluted share capital of the company.

The company has urged its shareholders to approve the deal, warning that failure to do so could lead to them losing the entire value of their investment.

Afren’s share price has subsequently dropped by over 15 per cent in early morning trading on announcement of the equity dilution plans.

The move has also scuppered recent takeover rumours. On 1 March, The Sunday Times reported that Fosun, the Chinese conglomerate controlled by the tycoon Guo Guangchang, has backed a USD 500m bid led by the Afren co-founder Bert Cooper.

Local Nigerian oil and gas companies Seplat, Lekoil and Oando were also reportly interested in takeover bids with the London-listed player.

The new financing agreement has been entered into by Afren together with certain noteholders under its 2016 Notes, 2019 Notes and 2020 Notes and a majority of the lenders under its existing USD 300m Ebok credit facility, regarding the key terms of a proposed interim funding and recapitalisation of the Group, which is intended to result in the provision of USD 300m of net total funding before the end of June 2015.

The conditional agreement with noteholders represents approximately 42 per cent of the outstanding principal amount due under its 2016 Notes, 2019 Notes and 2020 Notes for the provision of USD 200m in net interim funding in the form of a super senior private placement notes (PPN), which are expected to be issued by the end of March 2015.

“2014 was a painful year for Afren and its shareholders,” said interim CEO, Toby Hayward.

“The consequences of the unauthorised payments issue and resulting dismissal of both CEO and COO immediately before the dramatic fall in the oil price coupled with the material reduction in our Kurdistan reserves and resources led to material impairments all of which significantly eroded shareholder value.

“We have responded by putting in place a number of recovery measures and a business plan that focuses on our valuable cash generating production assets in Nigeria and incorporates broad cost cutting measures. We are confident that Afren will emerge from this difficult period as a financially stable company capable of delivering growth in 2015 and beyond.

“This has been made possible because of the constructive discussions we have had with the Ad Hoc Committee of our largest bond holders as well as the group’s senior lenders and operating partners which has resulted in the funding announced today combined with a longer term focus on recapitalising the business. We anticipate appointing a new CEO shortly who will be able to work with all stakeholders and to lead the business forward.”

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