Pacific Exploration Is Weighing Alternative Restructuring Plan Despite Creditors Already Approving Catalyst Offer
Pacific Exploration & Production confirmed that it has received and is weighing an alternative restructuring proposal of at least US$575 million from a group led by its largest shareholder, O’Hara Administration. According to Bloomberg, the last-minute offer arrived prior to creditors approving a long-debated plan from Catalyst Capital Group Inc. on August 17.
Some shareholders, including O’Hara Administration, which owns nearly 20% of Pacific Exploration, have been seeking to block the Catalyst offer since it was first announced. In April, their stated position was that the Catalyst deal, which was approved by more than 98% of creditors this Wednesday, would benefit Pacific Exploration’s leadership much more than shareholders.
In a statement, Pacific Exploration said that, although it did not solicit this alternative proposal, the company is still reviewing it with lawyers and bean counters. And it “emphasizes that no decision regarding the proponent’s proposal has been made.”
In addition to O’Hara Administration, the contingent making the new offer includes Fernando Chico Pardo of Promecap S.A. de C.V., Sergio Gutierrez of the DeAcero Group, and Carlos Bremer Gutierrez of Value Grupo Financiero, among others.
The alternative proposal includes a provision to pay the fees that would be associated with terminating the Catalyst Capital deal.
In a statement, Pacific Exploration provided the following summary of the alternative proposal, with the “Proponent” being the group making the offer:
- Offers $575 million USD in debtor-in-possession (DIP) financing, of which $325 million USD is to be provided by the Proponent and the remainder by the existing DIP providers, other than Catalyst, and is subject to a backstop by the Proponent. The portion of the DIP financing to be provided by the existing DIP providers will be issued with an original issue discount of 10%. Certain deadlines for completing steps in the DIP process have been extended by 4.5 months as compared to the Creditor/Catalyst Restructuring Transaction.
- Contemplates that the DIP financing will be used, in part, to pay the break costs and fees payable in connection with the termination of the Creditor/Catalyst Restructuring Transaction.
- Allocates 15% of equity to the Proponent upon emergence, in addition to the 12.5% in equity it would receive for providing its portion of the DIP financing.
- Offers $300 million USD to be used to acquire up to 25% of the shares of the company issued to creditors under the reorganization, at the creditors’ option.
- Contemplates potential additional consideration of $250 million USD, to be funded and paid for by the company, to existing creditors; although not fully defined, it would appear one-half of such consideration would be in the form of unsecured debt and the other half would be payable in cash contingent on the equity market capitalization of the company being $2 billion USD or higher for a specified time period.
- Maintains the existing 10% post-recapitalization management incentive plan.
- Provides no recovery to existing shareholders.