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EIG Seeks to Disrupt Catalyst Deal, Submits Binding Offer to Buy Pacific Energy
Posted On May 10, 2016
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EIG – New ProposalEIG Global Energy Partners yesterday announced that EIG Management Company, LLC on behalf of funds, accounts and companies it manages — namely Harbour Energy Ltd. — has submitted a binding proposal to provide debtor-in-possession financing and restructuring to Pacific Energy, formerly known as Pacific Exploration & Production Corporation or Pacific E&P pursuant to formal proceedings under the laws of Canada, Colombia, and the United States.
This comes just one day after Pacific E&P announced that over 75% of existing creditors had approved of the restructuring deal put forward by the Catalyst Capital Group. The proposal, which expires on May 31, 2016, was submitted to Pacific E&P’s board of directors on May 7, 2016 and simultaneously provided to the company’s Canadian, court-appointed monitor.
As of presstime, no comment by either Pacific Energy or Catalyst Capital Group has been forthcoming.
EIG claims that its proposal represents a superior solution for Pacific E&P and its creditors, offering a significantly higher recovery value for creditors and a stronger balance sheet for Pacific E&P compared to the debtor-in-possession (DIP) financing proposed by the Catalyst Capital Group. EIG says that its proposed $250 million DIP financing would convert into less equity of the reorganized company than in the Catalyst proposal.
Furthermore, EIG would contribute an additional $75 million for no further consideration to bolster the reorganized company’s balance sheet and compensate it for the $25 million breakup fee payable in connection with the catalyst proposal, with the remaining $50 million to be used as operational capital. EIG’s proposal also provides $80 million in additional market notes to creditors.
Download EIG’s New Proposal here.
EIG’s proposal also allows existing shareholders, in addition to creditors of Pacific E&P to participate in the transaction by funding a portion of equity in order to “cash out” creditors who prefer up to $400 million cash rather than equity as their form of recovery. Together with a fund to be established outside of the restructuring for the benefit of certain of the company’s Colombian stakeholders if the EIG restructuring plan is successful, EIG claims that these features provide a meaningful opportunity for shareholders to participate in the value of the company.
The new EIG offer proposes a recovery value of at least 15.4¢/dollar, 67.1% over the Catalyst Proposal, and includes additional $75 Million capital infusion and $400 Million “cash out” offer.
“EIG’s binding proposal is undeniably superior and is clearly in the best interests of creditors, the company and its other stakeholders,” said Blair Thomas, EIG’s CEO (above photo). “Under our proposal, creditors will realize the strongest available returns and the company will benefit from EIG’s robust financial strength and operational expertise gained through decades of focused, long-term strategic investing in the global energy sector. Our proposal provides the best path forward for all stakeholders, including creditors, shareholders, employees, commercial counterparties and the communities and countries in which the company operates. The numbers speak for themselves.”
| Summary of offers [According to EIG] | ||||||||||||
| ($’s in millions unless noted) | EIG’s Revised Offer | Catalyst / Co-Chairman’s Offer | EIG’s Revised Offer $ Premium to Catalyst Offer | EIG’s Revised Offer % Premium to Catalyst Offer | ||||||||
| Sponsor Ownership Post Equitization | 25.0 | % | 29.3 | % | ||||||||
| Creditor Ownership | 62.5 | % | 58.2 | % | ||||||||
| Funding Creditor Ownership | 12.5 | % | 12.5 | % | ||||||||
| Implied Equity Value | $ | 1,200 | $ | 853 | $ | 347 | 40.6 | % | ||||
| Post Restructuring Debt | 330 | 250 | ||||||||||
| Implied EV | $ | 1,530 | $ | 1,103 | $ | 427 | 38.7 | % | ||||
| Consideration: | ||||||||||||
| Creditor Equity Recovery | $ | 750 | $ | 497 | ||||||||
| Creditor Note Recovery | 80 | – | ||||||||||
| Total Creditor Recovery | $ | 830 | $ | 497 | $ | 333 | 67.1 | % | ||||
| Implied Dollar Recovery | $ | 0.154 | $ | 0.092 | $ | 0.062 | 67.1 | % | ||||
| Funding Creditor Equity Recovery | $ | 150 | $ | 107 | ||||||||
| Funding Creditor Note Recovery | 250 | 250 | ||||||||||
| Total Funding Creditor Recovery | $ | 400 | $ | 357 | $ | 43 | 12.2 | % | ||||
| Implied Dollar Recovery | $ | 1.600 | $ | 1.427 | $ | 0.173 | 12.2 | % | ||||
| Sponsor Equity Contributed to Company | $ | 300 | $ | 250 | $ | 50 | 20.0 | % | ||||
| Total Cash Contributed to Company | $ | 550 | $ | 500 | $ | 50 | 10.0 | % | ||||
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