RE: Bebeto28 Sep 2023 09:33
Here's an extract of what I was sent:
The reality is that whatever gas prices do, it isn’t going to be anywhere near enough for the company to be in a position to repay the bonds in 12 months time, plus of course there is the London Oil and Gas (LOG) loan of £9.8 million.
So far, the bondholders have been waiving the covenant breaches, with a further extension until September 29 recently agreed, but I suspect the only reason for that is that a possible solution is being negotiated in the background.
Not only is this an issue for IOG, which would find itself in administration if the bondholders started to enforce the covenants, but it is also a big headache for the bondholders who potentially stand to take a big hair cut on the €100 million of debt that is outstanding.
Shares in the company are now trading at just 0.95p on the ask and it has a market cap of less than £5 million, so there is no way that any significant amount of money is going to be raised via an equity issue.
The only way forward seems to be a renegotiation of the debt, or the bondholders do some sort of deal directly with the JV partner CalEnergy and basically take over the assets of IOG, but given that IOG was the operator, that seems far from ideal and these lenders never set out to directly own a stake in gas fields, they were just looking for a return on their money via the 9.5% coupon that is paid quarterly. Especially as further funding is going to be required for anything of an operational nature to try and improve production.
So, whilst that is a possible outcome, I see it as far more likely that a debt-for-equity deal will be done whereby the bondholders convert at least some of the debt into equity in the company. If that does happen then I would expect that it will be done at a level that results in a wipeout for current equity holders – the bondholders aren’t going to take a big haircut and let shareholders keep part of the company.
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