EIG Provides Update on Proposed Restructuring of Pacific Exploration & Production Corp.
EIG is Offering to Acquire Any and All of the $4.10 Billion of
Pacific E&P Senior Notes
EIG’s Offer Represents Price Certainty and a Significant Premium in
an Environment Where Oil Prices are in Free-Fall
Interest Payments have Already been Missed and Bondholders Face
Prospects of De Minimis Recovery if They Continue on the Current Path
No Alternative has Emerged and Time is Critically Short
EIG Urges Holders of Senior Notes to Tender Today
EIG Pacific Holdings Ltd. (the “Offeror”), a Cayman Islands limited
company and subsidiary of Harbour Energy Ltd. (“Harbour Energy”), today
provided an update regarding its pending tender offers (the “Tender
Offers”) for the outstanding senior notes (the “Notes”) of Pacific
Exploration & Production Corporation (TSX: PRE) (BVC: PREC) (“Pacific
E&P” or the “Company”).
On January 13, 2016, the Offeror commenced tender offers to purchase for
cash any and all of the approximately $4.10 billion aggregate principal
amount of outstanding Notes of Pacific E&P. EIG announced that day that
it believed “Pacific E&P is on the verge of insolvency and out of other
options.” Less than 24 hours later, Pacific E&P confirmed the severity
of its situation by announcing that it had elected to forego making
scheduled interest payments and would be utilizing the 30 day interest
payment grace period under the indentures governing its Notes and
earlier today, S&P announced that it is lowering the Company’s corporate
credit and issue-level rating to ‘D’ on S&P’s expectation that Pacific
E&P will “enter into a general default and that it will fail to pay all
or substantially all of its obligations as they come due.” “We correctly
informed the market about the dire financial situation at Pacific E&P
last week and we believe the situation will spiral downward now that the
cloak of denial has been lifted and in the face of a rapidly
deteriorating market environment,” said R. Blair Thomas, CEO of EIG and
Co-Chairman of Harbour Energy’s Board of Directors.
It appears highly unlikely that Pacific E&P will make the deferred
interest payments on the 2019 Notes and the 2025 Notes nor make interest
payments on the 2021 Notes or the 2023 Notes when due. However, for
those that tender, because Harbour Energy’s offer includes all accrued
and unpaid interest payments across all four tranches of Notes up to the
end of the Company’s 30-day grace period on February 19, 2016 (assuming
the company does not file for insolvency prior to that), EIG’s Tender
Offer consideration of $175 per $1,000 of principal plus accrued
interest is effectively $200.66 per $1,000 of principal on average
across all four tranches of Notes.
“With an average effective price of approximately 20.1%, our offer
represents a 100% premium over the average 10% bid price where Pacific
E&P’s bonds were trading immediately before our offer was launched and
when the market expected the Company to make its January interest
payments. We believe the Company’s cash position is dire and that the
market has underestimated the severity of the situation. The only
credible solution is one that combines a significant infusion of new
capital with a balance sheet restructuring in order to avoid a long and
value-destructive asset level reorganization or distressed sale. Our
offer presents certainty of value to bondholders in light of a highly
complex and uncertain outcome. Further, Pacific E&P is a capital
intensive business operating in multiple jurisdictions with potentially
unpredictable legal outcomes, and we believe the Company would have
material trade and contractual claims, many of which may have structural
seniority to the bondholders in a true liquidation of the Company. There
are few other potential sponsors with the capacity to fund the
significant capital needs of the Company, the technical and managerial
capabilities to oversee an E&P Company of this scale, the ability to
navigate the numerous complex legal and regulatory issues that an
in-court restructuring will involve, as well as the familiarity with
Pacific E&P’s operations and management team to be relevant on the
timescale necessitated by the Company’s situation. We are committed to
shepherding the Company through an expeditious reorganization that will
permit it to continue operating, remain intact and thrive once again. We
hope to work with the Board and management to ensure continuity, job
preservation and an efficient restructuring process.”
Added Mr. Thomas, “We are grateful for the bondholders who have already
indicated they will tender. We believe our proposal represents the best
outcome for Pacific E&P as well as the bondholders as it provides a
significant premium and de-risks recovery in a comprehensive and
credible way. In our view, a single voice which is prepared to support
further growth of the Company in partnership with Pacific E&P’s
management and other stakeholders is the only viable solution.”
Mr. Thomas concluded, “EIG has been investing exclusively in the energy
sector for more than 33 years. We are a disciplined investor and our
offer is based on a thorough analysis of the Company’s current situation
and its realistic prospects. Oil prices and energy markets are only
moving in one direction right now so bondholders should be very cautious
when listening to some of the false optimism being floated in the
market. Any delay in accepting our offer will only result in further
value degradation and a negative impact on the price at which we would
value the bonds. We therefore urge holders of the senior notes to tender
today.”
About EIG and Harbour Energy
Harbour Energy is an energy investment vehicle formed by EIG Global
Energy Partners (“EIG”) and the Noble Group to pursue control and near
control investments in high-quality upstream and midstream energy assets
globally. Harbour Energy is externally managed by EIG. EIG specializes
in private investments in energy and energy-related infrastructure on a
global basis and had $14.3 billion under management as of September 30,
2015. During its 33-year history, EIG has invested $21.4 billion in the
sector through more than 300 projects or companies in 35 countries on
six continents. For more information, please visit www.harbourenergy.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160120006483/en/
Copyright Business Wire 2016
Source: Business Wire
(January 20, 2016 - 5:00 PM EST)
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