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Agree, nothing new here. As long as it gets voted through then it’s all good.
To put this in context, this is raised in todays circular, Section 2 "Risks relating to the transaction not proceeding", as a potential consequence if the sale of EG is not approved by shareholders.
It is also likely to mean we will have to live with a another material uncertainty opinion for the 2020 audit...operationally little impact but financing costs will be no be as low as the could have been with a clean opinion and also less leeway for adverse press...I think Rahul will clear it up with the voiceover on 18 March webinar
Cheers Runningman
@Roxbury ...I don’t doubt your interpretation from a legal standpoint as wording is harsh. Part of that will be the directors obligations etc and part to ensure shareholders vote....I take more comfort from the words used in last RNS. I don’t think our bond holder group are majority the loan to own types so will come down to pricing and no doubt PJT will be looking at alternative new lenders for a new bond...otherwise no success fee....my concern is really around completing the refi with existing bonds or new participants before the market froth evaporates is there are other external shocks...I’d pay a bit more and just get it done rather the nickel and diming...I think Dot, Rahul and Les are all pretty cautious so have it in hand
Nothing to be concerned on here - none of this is new and is the logical exact position we'd expect given everything since key annoucements and figures were given across the last six months or so. Feels more of a shout out to stakeholders saying 'don't do anything silly now, the stars are aligning but pulling the plug will be in no one's interest'.
There must be an oil price at which each oil producer makes a £1 profit or indeed a £1 loss. Or of course a £500m profit or a £500 million loss. I should imagine they have hedged some more and a bit like last year put a floor of $50.8 on the realised OP for the business. Even though in the open market the average price was $41.96 in 2020.
It seems like the mood music for the ongoing conversation with the banks is upbeat
It's still there, just need to take the bracket off the end.
@Roxby - That link doesn't work for me. Could it be that it wasn't meant to go out as it seems TLW have removed it.
Some uncomfortable disclosure in the TLW shareholder circular posted today (https://www.tullowoil.com/application/files/9616/1467/8250/21-7653-1_Walnut_Circular_OKTP_v1.pdf). TLW Board is still of the opinion that it does not have sufficient working capital for its present requirements based on the current 18-month look forward RBL Liquidity Forecast Test. The shortfall is US$365 million under the reasonable worst-case scenario (average oil price of US$45/bbl in 2021 and US$47.5/bbl in 2022 financial year), and there is still a shortfall (unquantified) under the TLW base case (US$50/bbl in 2021 and US$55/bbl in 2022). This happens because it assumes TLW cannot refinance the April 2022 bond.
What is new and worrying is that TLW is not just asking the RBL banks to grant a waiver of the Liquidity Forecast test (a reasonable request given the outlook for oil prices and a strong case it can refinance the 2022 bonds). It now seems management are actually entertaining a distressed debt amendment to the entire capital structure.
The circular says management have ‘commenced discussions with its creditors with the objective of agreeing certain amendments to the terms, including the maturity date, of some or all of the RBL Facility, the Convertible Bonds, the 2022 Senior Notes and the 2025 Senior Notes, that would enable the Group to pass the Liquidity Forecast Test, which is currently in progress, with, if necessary, such amendments being approved by Shareholders.’ (Circular pages 76 and 77).
To even think about restructuring the convert and bonds rather than pushing to refinance as quickly as possible is nuts, It will do long-term market damage to TLW’s future market access.
It must be banks are refusing to agree to waive the liquidity test unless some pain is inflicted on the convert and bonds. But to do this simply to meet a paper exercise in forecasting future oil prices is shortsighted.
I question what advice PJT is giving TLW, and why are they not pushing harder to solve this by calling the 2022s early with a bond refinancing done right after the results next week.
The reason S&P has TLW on 'CCC+' credit watch negative is fear of a distressed bond exchange. If you want to permanently trash your debt market access this is the road to follow.
My concern: having come all this way over the past year TLW will mess it up with talk of debt restructure. If its bad for debtholders invariably its worse for equity.