Southern Pacific becomes first E&P in oil sands to seek creditor protection
Southern Pacific Resource Corp. (ticker: STP), based out of Calgary, Alberta, Canada, announced yesterday that it has obtained creditor protection under the Companies’ Creditors Arrangement Act (CCAA).
CCAA protection prevents creditors and others from enforcing rights against the company and affords STP the opportunity to restructure its financial affairs for the duration of the order. With the stay of proceedings, Southern Pacific does have sufficient liquidity through February 20, 2015, the date of expiration of the CCAA protection order.
While under CCAA protection, the company will continue with its efforts to pursue strategic alternatives, including restructuring its existing debt obligations and pursuing the sale of assets. Also while under CCAA proceedings, STP will continue operations uninterrupted, with Southern Pacific’s Board of Directors maintaining its usual role and its management maintaining its responsibility for day-to-day operations for the company.
The face value of the company’s long-term debt is summarized as follows, order by priority by STP:
- USD$135.5 million currently owing on a first lien term loan;
- USD$210.84 million outstanding on certain senior secured second lien notes; and
- USD$139.89 million outstanding in convertible debentures (unsecured)
Southern Pacific follows oilservices company GASFRAC Energy Services Inc. (ticker: GFS), another Calgary based company, in filling for creditor protection. Many smaller Canadian companies are warning that high debt mixed with low oil prices could put them in similar positions soon, reports BNN.
In an effort to soften the blow from falling oil prices the Bank of Canada lowered its main interest rate yesterday to 0.75% from 1.0%. This is the first time since 2009 that the Bank of Canada has made a cut to the interest rate.
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