Member Info for PaulCurtis

GKP offers a very useful comparison to PFC.

At the time I was in the Bonds and making the same points I am now.

PI’s couldn’t accept that a company with 10 bn barrels of oil could be worth less than the debt. With PFC it’s the $8bn order book.

And they couldn’t believe that a company that was trading at c. 200p could now be worth less than the then 10p. The price dropped to 1p before the 100 for 1 consolidation.

And they suffered the same overwhelming temptation to price average down (which we all do when sitting on a big loss)

GKP and PFC are both good companies but running out of cash when you are sitting on a pile of debt is a killer. It’s impossible to refinance without a D4E because new equity does not want to come in behind a pile of debt, especially when needs to be repaid within two years.

Ivor

Read the Going Concern statement! They are effectively insolvent right now because they can’t pay interest. Debtholders have given them a bit of time to find a solution. BH’s until the end of the month, banks review weekly.

The 41% is the ad hoc group who are offering the $300m rescue. They are all insiders. The rest of the BH’s will agree to whatever gives them the best return as in minimal loss. This is probably the D4E but like me, they don’t know the terms and how painful it will be re any haircuts etc.

It’s possible that insolvency offers a better option although this will wipe out equity.

All parties would bite the arm off any sort of a takeover that kept everyone whole but sadly there is no sign of this. Only wildly optimistic group think - share price goes up and you all think someone knows more than you do!

There was a 100 for 1 share consolidation immediately after the restructuring.

The $25m was raised at 0.83p old money.

The £30m was the market cap at the time of the announcement based on the then 3.42p share price.

Old equity ended up with 4.5% pre the RI.

Cash-strapped Kurdistan oil minnow Gulf Keystone Petroleum was today saved from extinction after negotiating a debt restructuring with creditors, but the deal came at a heavy cost to its beleaguered shareholders.

The former AIM darling, which at the start of the decade became a symbol of the opportunity on the junior market to cash in on early-stage oil explorers, is turning $500 million of debt into equity, cutting its debt pile to $100 million.

The heavy dilution will leave existing investors with just 5% of the company, which could rise to 10% if they take part in a $25 million open offer. The news caused the already-battered shares to dive 1.18p, or 25%, to 3.52p.

This values GKP at just £30 million. It was worth over £1 billion four years ago.

Bottom line is that PFC needs a load of new cash but can’t raise it because debt too high. Without new cash they are going bust.

The ONLY hope for equity is a buyer at above EV but there is no sign of this….

PFCVet

The £20-25m valuation is the usual value placed on retaining the listing when a distressed D4E. Check out GKP.

The debtholders will look to maximise their own return since they are providing the funding solution. This means giving equity the bare minimum that a Court will sanction. That’s the value of the listing

Ivor

“If Petrofac were actually insolvent to continue to trade would be wrongful trading”

They are only not insolvent because the debtholders have given them breathing space. As the GC says, this could change instantly

Paul couple of Q's for you

1. How much does PFC owes

About $800m. This is the killer, especially as all of it must be repaid over next two years. Means they can’t raise new equity nor get Performance Guarantees.

2. What is the current value of PFC

Equity is worth £25m if D4E, nothing if insolvency. They can’t raise PG’s or new equity so will go bust unless Debtholders agree to D4E. Now easy meat for the vultures.

3. If the value is less, wouldn't it be wise to take D4E

Yes, this is what’s happening. But some debtholders may prefer insolvency

4. If company goes under the Banks will pick-up the scraps first and then everyone else, if any thing left

The banks and BH’s are pari passu

5. Don't you think if all or most of the debt is clear, PFC can make profit and start to pay Divd, in time.

Yes. The debt is the problem.

PFCVET

You need to understand that Debtholders don’t want a D4E, it is being forced on them because PFC is insolvent.

The restructuring will value equity at its listing value of about £20-25m. Equity has no other value if the debtholders are being forced into this.

Hence the D4E price will be around 4-5p.

This will be effected by a Scheme of Arrangement with a Court signing off on the terms. Look at Gulf Keystone as a very similar situation.

I’m surprised no 7am update but maybe PFC think the 16th June deadline does not warrant an RNS since it was only referred to in the Going Concern statement.

I assume no news by Monday means that they’ve secured the PG for this project but perhaps wishful thinking!

I only hold the senior secured bonds, have no short position (and never have had) and I’m very nervous. I don’t understand how any of you can be holding equity. I think there is a real risk of insolvency, increasing by the day. Read the Going Concern statement re the bit about determining break up in insolvency and in particular how PFC don’t know what the intentions of certain debtholders are. Does this mean they are seriously interested in the solvency option rather than D4E?

And if we swerve insolvency then imo (and I’m 99.9% certain on this!) the D4E will be priced at c. 4p or 5p.

Ivor

If debtholders get a more attractive return via insolvency and flogging off the best bits than from D4E, they will pull the plug. PFC will continue to trade in administration and equity will get zilch and have no say on the matter.

It’s possible that any takeover rumours are based on the bits being flogged off. It’s even possible that the idea is to find a buyer for the lot, go into insolvency and then sell out to the bidder with Debtholders agreeing to take major haircuts. The business is clearly insolvent if Debtholders have to take haircuts

Why the delay? The bones of the restructuring was announced on 12th April so what’s the hold up?

The 41% of BH’s offering the $300m want Performance Guarantees, maybe this is the problem. However this seems solvable, worst case Debtholders take haircuts and, combined with D4E, reduce the debt burden to a level acceptable to the Banks offering the PGs.

The other issue could be the reference in the Going Concern statement to certain Debtholders asking PFC to determine the feasibility and presumably potential break up value via insolvency.

Most debtholders won’t want PFC equity and we don’t know what the 41% BHs will want in return for providing the finance (eg interest rates). And the $200m will be super senior to any existing bonds that survive.

So the other debtholders may prefer insolvency if it say offers them a good chance of say a 50% cash return this year.

Obviously equity would be left with nothing if Debtholders take a loss.

So the delay could be down to PFC evaluating this option but 16th June is the deadline of the first set of PGs. PFC has agreed these PG’s but needs the RCF/TL to sign off on the required cash collateral. PFC have the cash, they just need consent….

So we appear very close to the moment of truth… We should get an update anytime and Monday at the latest.

Ivor

‘ Chances are rumours and do not have to be reported’

So why hold the equity if only rumour?

‘In reality BODs do not have to report very much at all.’.

This is clearly untrue. The market has been told to expect a very dilutive D4E or insolvency yet the shares were up 150% at one stage. If there is any chance of a takeover the board would have to report it. The rules here a very strict

Ivor

If the BoD believe there is a reasonable chance, say at least a 50% chance of a takeover, they would have to notify the market immediately. They do not need a concrete offer. This is self evident. Look at EBOX.

CLEARLY the BoD believes that there is currently a less than 50% chance?

IMO there is a near zero chance! PFC’s killer problem is too much debt due for repayment over the next two years. This makes it impossible for PFC to raise new equity or get PG’s.

The debt has to be restructured and reduced. This is likely to be painful for debtholders and extremely painful for equity.

Any takeovers will be post restructuring or during insolvency

Ivor

You make no sense! Why would the board reject an offer at say 20p a share when the only alternatives are a D4E or insolvency!

To keep it simple, if at any point the BoD think that there is at least a 50:50 chance of a takeover, would they have to notifify the market immediately? Agreed?

The answer is clearly yes, especially as the most recent update was restricted to D4E or insolvency.

So clearly there is currently a less than 50% chance of a takeover?

Can we all agree on this?

So why would anyone invest in the equity at this price in view of the risks!

Apothecary

I think you need to visit SpecSavers and then actually read the last update!

"The Financial Restructure discussed below is currently the only option to secure the future operations of the Group and active discussions are ongoing. The realistic alternative to the Financial Restructure is insolvency."

Do you see any reference whatsoever to a takeover?

If any takeover option suddenly materialised PFC would have to update the market immediately since they have said the opposite.

Anyway, I suspect we will get an update tomorrow as very close to the bond guarantee deadline…..

Look at the FACTS!

The bonds are trading at 25 cents on the dollar!

The shorts are not closing, still over 10%!

PFC told you only 10 days ago that it’s a highly dilutive D4E or insolvency! They have not updated this. They are legally obliged to do so. Listen to the web cast when they apologise to equity.

If it quacks like a duck, walks like a duck and looks like a duck it’s a ******* duck.

Either there will be a D4E, insolvency or a takeover.

If you think a better than 50% chance of a takeover AND the upside is large enough to justify the risk of D4E/insolvency (ie >30p) then hold.

If not, then sell now and buy back post the D4E, say at 4p. And you swerve the risk of insolvency wipeout.

Another important point to factor in. After the D4E the BH’s will be holding nearly all the equity and they will be sellers. The share price is likely to trade under the D4E price as we all look to exit. That’s when we may get a takeover….

And the critical issue is that the shares are up 100% since suspension despite the company warning that the two options are a very dilutive D4E or insolvency. This is the ultimate false market if there is any reality to the takeover rumour.

The FCA will be all over PFC…

I’ve been part of a consortium to clear our a seller in LABS which we did this morning.

I contacted LABS to check all well and this was part of the reply

‘ Equally, the absence of announcements is in itself a statement given the obligations placed on listed companies. ‘