IGas said this morning it was having talks with a “potential strategic investor” as it headed towards a predicted failure to meet financial obligations.
A company statement said it forecast it would not comply with its leverage covenants as at 31 December 2016.
But it said discussions with the investor were “well-progressed” and ongoing.
An agreement would, the statement said, “remedy any leverage covenant breaches as at 31 December 2016”. It would also remedy the forecast breach of daily liquidity covenants predicted for late March 2017, when the next interest payment on secured bonds was due.
The statement added:
“there can be no certainty that an agreement will be reached”.
On 26 October, IGas asked bondholders to waive the company’s daily liquidity covenants. Holders of unsecured bonds agreed but the secured bondholders did not.
Five days later, the company confirmed it was in talks with Trans European Oil & Gas (TEOG), thought to be a leading holder of its secured debt. TEOG had proposed the sale of IGas’s conventional assets, which include oil and gas fields in southern England, the East Midlands and sites in north-west England.
In early November, IGas avoided a breach of its daily liquidity obligations by selling secured bonds with a value of $8 million.
This morning, it said:
“The Company has recently met with certain of the Company’s bondholders and potential strategic investors to discuss its capital restructuring options and valuation of the Company, as it continues to assess options which will allow a new capital structure for the Company that is sustainable in the current oil price environment and enables IGas to capitalise on value accretive opportunities.”
The statement confirmed that IGas had another five months in which to deal with the breach of the leverage covenant expected at the end of this week. IGas suggested it could inject additional equity to cure the breach.
The compliance certificate on the covenant for the 12 months ending on 31 December must be delivered by 30 April 2017. According to legal advice, IGas said it could cure a breach within 25 days of delivering the certificate. That would mean the latest date for the equity cure would be early June 2017.
The statement added that IGas cash resources stood at $32m at 22 December 2016.
At the time of writing (1pm), the IGas share price was down 7.25% at 10.78p.