West of Shetland oil producer has failed to push through “controversial” financial restructuring plans that would have wiped out shareholders following a court ruling.
Hurricane Energy made promising finds in the West of Shetland in its Lancaster field and it hoped to produce oil from “fractured basement” rock formations.
The company was been unable to sustain the intended production rates and parted ways with its founder and former chief executive Robert Trice last year.
The company currently has $230m bonds outstanding, which need to be paid by next year.
The High Court ruled against the oil and gas producer’s plan which would have handed control to its bondholders.
The move would have seen the holders forgiving $50m of debt and extending the maturity date on a further $180m of bonds, due to be repaid in July next year.
Shareholders including its second-largest investor Crystal Amber with more than 14% in the company revolted against the unpopular plans.
It would have seen shareholders unable to vote on decisions and allowing bondholders to vote. It would have left shareholders with just 5% of the company’s equity.
Justice Zacaroli in his judgement regarding the case, noted: “The Plan would remove, immediately and irrevocably, all but a fraction of the current shareholders’ equity in the company.”
He noted on the ad hoc committee (AHC) of bondholders which Hurricane has been negotiating: “The AHC’s desire to obtain control of the company is not a good reason to deprive the shareholders, now, of all but a fraction of their equity in the company rather than waiting to see if actual performance over the coming months improves the outlook for the shareholders.”
Justice Zacaroli also added: “The Company is profitable, and anticipated to remain profitable for at least the next year and the company’s evidence is that the P6 well is likely to remain economically viable until early 2024.”
The company said it was “considering all options, including an appeal” and said that bondholders had “certain rights under the terms of the convertible bonds that, if enforced, could result in an acceleration of the convertible bonds and ultimately an insolvent liquidation of the company”.
Activist investor Crystal Amber proposed to remove Hurricane Energy’s chair and non-executive directors and replace them with its own candidates at a general meeting on 5 July.
Simon Walton, partner at Rosenblatt, acting on behalf of Crystal Amber Fund, said: “Against all the odds, this is a victory for shareholders big and small who faced having their legal rights being overridden. The board putting this restructuring plan before the court now was premature, and influenced by the Committee of bondholders trying to take control of the Company away from shareholders.
“It is especially concerning that the current board was seemingly willing to exploit legislation introduced in response to the Covid pandemic to do so.”
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