Pacific Exploration & Production Corp. (TSX: PRE) (BVC: PREC), formerly known as Pacific Rubiales, announced on Thursday that it has elected to utilize the 30 day grace period pursuant to the indentures governing its 5.625% notes due January 19, 2025, and its 5.375% notes due January 26, 2019, rather than make the interest payments due on January 19, 2016 and January 26, 2016, respectively, in connection with this debt.
Specifically, according to Pacific Exploration the following interest payments will not be paid on the scheduled payment dates: $31.3 million USD in the aggregate in respect of the 5.625% notes scheduled to be paid on January 19, 2016; and $34.9 million USD in the aggregate in respect of the 5.375% notes scheduled to be paid the end of next week, on January 26, 2016. The company has elected to use the grace period to assess strategic alternatives with respect to its capital structure.
Pacific Exploration announced its intention to utilize a 30 day grace period permitted under the indentures governing its 5.625% notes due in 2025 and its 5.375% notes due in 2019 to assess strategic alternatives and an extension to the minimum liquidity deadline under the waivers.
Pacific Exploration’s current liquidity position is being routed by the continued low international oil prices. The company says that it will use the grace period to engage with its creditors (including its lenders and holders of each series of the company’s notes) with a view to making its capital structure more suitable to current market conditions. The company states that it remains and intends to remain current with its suppliers, trade partners and contractors, as normal operations continue in Colombia and the other jurisdictions within which the company operates.
Pacific Exploration also goes on to state that the failure to make the January interest payments on the scheduled dates does not constitute an event of default under the indentures that govern the notes. In each case, the company has a 30 day period from the scheduled payment dates to cure the failure to make such payments and the company reserves the right to make the January interest payments prior to the expiry of each grace period.
As previously announced on December 28, 2015, the Pacific Exploration obtained certain waivers with respect to the: $1 billion USD revolving credit and guaranty agreement with a syndicate of lenders, and Bank of America as the administrative agent, a $250 million USD credit and guaranty agreement with HSBC Bank USA, as agent, a $109 million USD credit and guaranty agreement with Bank of America as lender, and a $75 million USD master credit agreement with Banco Latino Americano de Comercio Exterior as lender.
Pacific Exploration is being advised by Lazard Frères & Co. LLC.
The waivers obtained by the company provide relief in respect of the covenant that requires its consolidated net worth to be above $1 billion USD and with respect to the company’s consolidated leverage ratio of 4:50:1:00, which reflects the permitted gross debt-to-trailing twelve month adjusted EBITDA. The waivers are set to expire on February 26, 2016 and are subject to the satisfaction of certain terms and conditions, including a condition that the company and the requisite threshold of the company’s lenders reaching an agreement on or before January 14, 2016 with respect to a covenant providing for the minimum amount of unrestricted cash to be retained by the company throughout the waiver period.
Pacific Exploration also announced last Thursday that the company and its lenders have agreed to extend the liquidity deadline to this Thursday, January 21, 2016, or such later date as the company and its lenders shall agree.
Pacific Exploration is a Canadian public company involved in exploration and production of natural gas and crude oil, with operations focused in Latin America. The Company has a portfolio of assets with interests in more than 85 exploration and production blocks in seven countries including Colombia, Peru, Guatemala, Brasil, Guyana, Papua New Guinea, Mexico and Belize.