Creditors have approved Pacific Exploration & Production‘s restructuring plan, the company announced today. Dennis Mills, chair of the independent committee of the board of directors, said that this deal with Toronto-based private equity fund Catalyst Capital Group Inc. is a major step towards the Canadian energy company getting out of creditor protection.
More than 98% of affected creditors approved the plan, which will begin to be implemented in the late third quarter or early fourth quarter of this year, according to the company. “We continue to believe that that the plan represents the best alternative for the long-term interests of the company,” said Mills.
Pacific Exploration entered creditor protection in April after filing with the Superior Court of Justice in Ontario, Canada. Prior to the filing, it had failed to make bond interest payments in both January and March.
The falling price of oil — on top of being forced to turn over control of Colombia’s lucrative Rubiales oilfield to the state-controlled Ecopetrol — has left the firm reeling in recent years with few options to meet payments on its debt. The company was known as Pacific Rubiales Energy Corp. before Ecopetrol decided not to renew a contract that would allow the Canadian firm to continue overseeing production at the nation’s largest oilfield. It rebranded soon after.
The restructuring plan with Catalyst Capital was negotiated in April despite “strong opposition from some Pacific shareholders who argued the deal favors management over investors,” according to a Wall Street Journal report in April.
Bloomberg also reported today that a last-minute, $575 million USD offer came in from a contingent that includes Mexican investor Fernando Chico Pardo and O’Hara Administration Co. This restructuring offer included $325 million in funding from the plan’s sponsor, another $225 million in debtor-in-possession funding, and the $25 million breakup fee related to the Catalyst deal, per Bloomberg. Even though the Catalyst deal has been approved, Bloomberg reported that “that decision could still be overturned.”
Last week, Pacific Exploration extended its proxy and election deadline by two days, moving it from August 10 to August 12. But Pacific Exploration said today that it currently has a final approval hearing scheduled with the Ontario Superior Court of Justice “scheduled to take place on or about” August 23 at 10:00 am.
“We look forward to rebuilding Pacific’s strength for the benefit of all stakeholders,” said Gabriel De Alba, managing director and partner of Catalyst Capital.