General Bond Discussion
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Premier oil refinancing.
General Bond Discussion
This is the link to the press release which was issued earlier to day.
What is "The group has also proposed amended terms to its retail bonds." likely to mean? A cut in dividend perhaps?
The shares have not responded significantly to the announcement.
Its talking about an increase in term and interest rate, which I don't mind. I only have a very small holding so not over concerned with risk and have decided to hold to maturity. Seems to infer retail bond holders get access to the warrant too. I'm surprised the share price has gone up as they are being promised a dilution.
So I was speaking to a credit analyst at large UK investment bank who covers Premier Oil debt research. According to him the Revolving Credit Facility, which - as part of the restructuring - will be secured compared the unsecured retail bonds, trades in low 50 price. I asked him then how does one explain the unsecured retail bond being quoted at 89/91. He could not.
I was wondering if anyone else had a cogent explanation?!
Hmmm.... 50 sounds too cheap to me, I would buy some of that, Don't have any PMO but I agree that selling around 89, would be a sensible risk reduction.
From JPMorgan -
Premier Oil (PMOLN) RCF USD: 52-54 (buyer 5mm )
Premier set to refinance $2.8bn debt pile after cutting losses (Times)
Premier Oil has insisted that it is set to complete the refinancing of its $2.8 billion debt pile, despite continued opposition by leading bondholders.
The explorer yesterday reported narrowed pre-tax losses of $390.6 million for 2016, an improvement on $829.6 million of losses the previous year. However, its operations have been overshadowed by efforts to restore its balance sheet after being adversely affected by the sharp fall in oil prices.
Premier agreed provisional terms of a refinancing last month but needs approval from a requisite proportion of each of its groups of lenders.
The biggest challenge is to secure approval of 75 per cent of its convertible bondholders, with Pyrrho, which holds about 10 per cent, objecting to the deal. Pyrrho said yesterday that it did “not believe that the Premier oil restructuring is home and dry”.
Tony Durrant, Premier chief executive, insisted that it did not “know of anyone” else among the convertible bondholders that objected and was confident of securing the required 75 per cent approval at a general meeting. “Based on the support now received, we can look forward to completion of the refinancing,” he said.
Premier’s 2016 results were affected by a $652 million impairment charge as it wrote down the value of its Solan field in the North Sea due to “poorer than anticipated” performance.
Premier cut its reserves estimate for Solan by about 10 million barrels but said that this was more than offset by increased reserves estimates for its Chim Sao field off Vietnam. Premier shares closed 4 per cent lower at 59.50p.
Skyllex also invest in oil:)
What's this to do with Premier Oil?
According to the FT, Premier Oil confirmed it has cleared a further hurdle to completing its long-awaited debt refinancing. The final lender has signed up to the terms & the re-financing deal is expected to complete in May.
15 Mar 2017
Premier today announces that the final Schuldschein loan holder has entered into the lock up agreement with respect to the terms of the proposed refinancing. As a result of this, the lock up agreements entered into by the Private Lenders (comprising the RCF, FLS Term Loan, US Private Placement notes and Schuldschein loans) and the convertible bondholders have now become effective, committing the parties who have locked up to vote in favour of the refinancing.
Peel Hunt: Premier Oil on course to slash debt
I put an order in for more at 84p anyone any thoughts
I bought some at 87p recently. (12K worth) Given they appear to be getting more finance and the bond has only 2 yrs 8 months to run, it seemed worth a "gamble" to me! I guess the price & yield should warn us to the risks!
I did the opposite and sold about the same value at 87p on 13th March.
My reasoning was that stocks of oil was increasing over the world, USA production increasing at a much higher rate etc. I'm hoping to go back into the stock when prices have lowered say in 9 months time. The recent events in Syria has probably caused oil prices a "temporary lift".
It also lowered my overall risk profile
USA Oil production Statistics
Let me know when you plan to sell, it probably be the time for me to buy back into the market.
I think we probably see things mostly the same. I lowered my risk profile elsewhere. I sold all my equities, sold longer duration bonds & bought short duration ones. In a pension I control, I switched the majority into index linked bonds and the rest in in property. This was my gamble on a smallish stake. Having cut the yield on a lot of my bonds, I wanted some risk to attempt to secure a bit more yield. The duration is short enough, but the price & yield suggests the risk is relatively high.
I agree, the day we delivered Article 50 to exit the EU, I sold my equity holdings which were in Artemis Global Income (Inc) & Evenlode Income B Income. Equities too high, some of the valuations are crazy, especially in the USA (eg Tesla).
Once we have a "major correction" to the market, I'm likely enter both of above funds again.
Now 99.5% Fixed Interest securities - Can sleep more peacefully at night!
Still have Prefs & longer dated ORB bonds, as interest rates are not yet increasing, but I'm watching them like a hawk - especially the 10 year gilts!
Current spate of imported inflation is likely to be short lived.
Deflation is still a worry in Europe & Japan
I tend to sell ORB bonds which mature within 18 months, yields usually become too low
Does anyone have any informed opinions on the refinancing update which was on RNS on 30/5?
is the link with the prospectus.
I have tried to read it, cant help thinking of Luke Johnson's article in S Times last weekend bemoaning the over-complication of prospecti.
There is an amendment fee of 100bps (ie a one off credit as far as I understand), interest on the retail bonds to go up 150bps,maturity extended to May 21, and warrants, exercise 42.75p, expiry may 22, not sure how many you get.
See pages about 47 onwards for this.
what are PMO cdis? Cdi holders have same economic right as retail bond holders?
were retail bond holders properly represented in negotiations (cannot help feeling expecting to come off worse v institutional)
it seems there is 'super' debt which rates above, and covenants of retail bonds are referred to as being less than other bond holders.
Would be good to know where other PMO debt referred to on page 50 is trading??
My personal interest is both as a small holder and a potential buyer if I could understand the prospectus!
Have just received this from Selftrade
Under the proposed Refinancing and Restructuring, Holders of CDIs (representing Retail Bonds £150,000,000 5.00% notes
due 2020) can elect to receive:
Option 1: Equity Warrants - Holders will be entitled to subscribe for Warrant Shares at the Exercise Price. The warrants are expected to expire 31 May 2022.
Option 2: Synthetic Warrants - Holders will be entitled to receive a pro rata share of a fee calculated by reference to the change in value of the Issuer’s market capitalisation.
Option 3: Combination of Equity and Synthetic Warrants subject to proration. Please indicate the Equity/Synthetic percentage split you would like to receive when submitting your election.
Please notify us by secure message or telephone no later than 5pm on 12 June 2017, stating the option you would like to receive.
If you do not make an election prior to the deadline, you will no longer be eligible to receive Equity Warrants. However there will be further opportunities to elect for Synthetic Warrants for a period of 12 months from the Restructuring Effective Date.
The Scheme is subject to Shareholder approval at the Scheme Meetings to be held on 26 June 2017. If you submit an election, we will submit a vote on your behalf to approve the Scheme Meeting resolutions unless instructed otherwise
Anyone have any thoughts/ideas/suggestions as to the benefits or otherwise of the type of warrant to opt for ?
Only 4 days to make my mind up, although in fairness I knew this was coming and just delayed investigation, so no one else to blame ......
My initial feeling is that 1) & 3 involves you putting up more money, while 2) involves you receiving some. I'd presume that if it were to all go to plan and they repaid what you should get back, you'd get more out of it in order 1) 3) 2) with you taking more risk in that order. My first instinct is to go for 2). It would be nice to see it written in the simplest terms!
Shotgun, thanks for your comments.
I had pencilled in (2) for my choice as, with lack of time to educate myself fully, it seemed the easiest to manage and wouldn't require more head scratching as to what to do in the future. Hardly a well reasoned, educated choice, but these are additional "benefits" so am willing to take the risk.
Will be checking back for any other views prior to phoning Selftrade on Monday !
Below is an extract from the notice sent to me by TD DIRECT containing info that might be of interest.
BTW, I appear to have been given a longer period to respond than Wozzitworthit has.
A corporate action is taking place in relation to PREMIER OIL (stock code BGQYRW8), which you currently hold in your portfolio. Please read this notice in full and make your election by 15th June 2017. What is happening? The above terms must be strictly read in conjunction with the official documents that may be found on the company website.
Scheme of Arrangement Option 1: Take no action (Default) Option
2: Vote For and receive Equity warrants Option
3: Vote For and receive Synthetic warrants Option
4: Abstain and receive Equity warrants Option
5: Abstain and receive Synthetic warrants
The default Option will apply to all holders who do not make an election by the deadline date.
Premier Oil has announced refinancing of the group that includes proposals to amend the terms of the 5% 2020 bonds, subject to bond holder approval at the meeting to be held on 26th June 2017. Full details of the Corporate Actions can be found on the company website and www.morningstar.co.uk.
Under the arrangement, bondholders may choose to take no action however, if the scheme proposals are approved, such holders will have 12 months to claim Synthetic Warrants (Option 1 - Default). Bondholders may choose to vote FOR the proposals and elect to receive either Equity Warrants (Option 2) or Synthetic Warrants (Option 3), if the scheme becomes effective.
Alternatively, holders can also choose to ABSTAIN from voting but also elect to either receive Equity warrants (Option 4) or Synthetic warrants (Option 53), if the scheme becomes effective. Please be informed that we are required to move your stock to Escrow for elections on Option 2 to 5; you will therefore not be able to trade the stock until it has been moved back to us. The proposal involves but not limited to the following:
Resetting the maturity date of the Convertible Bonds: The maturity date for the Convertible Bonds will be reset from 27 July 2018 to 31 May 2022.
Improved conversion price: The price at which the Convertible Bonds may be converted will be reduced to 74.71 pence.
Conversion at the option of the Convertible Bond Issuer: The Convertible Bond Issuer will have the option to require the conversion of Convertible Bonds at the conversion price.
Issue of Ordinary Shares and cash interest alternative: on 27 January, 27 April, 27 July and 27 October each year (each such date, an Issuer Date), the Convertible Bondholders will have the right to receive, at the election of the Convertible Bond Issuer
Convertible Warrants: Convertible Bondholders will be allocated warrants representing 3 per cent of Premier’s issued share capital on a Fully Diluted Basis with an exercise price of 42.75 pence.
The above terms must be strictly read in conjunction with the official documents that may be found on the company website
I would be very interested to learn if other self-trade platforms have been as informative as TD.
Some other numbers:
In January the share price was at a year high of 99.5p when the bond price was about 85p.
On Friday the share price touched a year low of 47.5p with a bond price of about 87p.
Not the easiest read but I think Shotgun is right. The equity warrents give the right to buy shares at 42.75p so this is what you would pay if you chose to take up the option.
The synthetic ones pay you a "growth fee" in cash if the value of the shares is over this amount (calculated by the market capitalisation) and other debt ratio related conditions are met
So synthetic seem easier to manage in that you don't actually have to do anything and might get a small bonus in the future. Exactly what this amount may be is well beyond my understanding!
edited June 2017
A million thanks for this.
I am amazed at how informative this is compared with Selftrade's letter (which only appeared to offer 3 clear options, although others were implied in a round about way)
On a scale of 1 to 10 TD Direct would score 10 and Selftrade 2 in my opinion
I may in fact write to them
I assume TD Direct is a similar company to Selftrade ie not a full service broker ?
Has anybody had a note from iDealing about this about how to deal with this? (I have just asked them).
And what is the default "do nothing " position?
I think frugal and wozzit are right in that option 2 seems the safest
I have asked HL and haven't heard anything back from them yet either.
Redmayne Bentley just emailed me regarding the above. Their default option is to vote for the proposal, with email response required should you wish to vote against. The email then goes on to spell out the new warrants as follows:
The Company is also proposing to undertake a bonus issue of new equity warrants (Option 1) and new synthetic warrants (Option 2) as part of the restructuring proposals. Bondholders can elect which type of new warrants they wish to receive or a combination of both. Both the new equity and synthetic warrants will be issued pro-rata to Bondholders therefore we are unable to confirm the number of new warrants you will receive until after the event has been completed. Please note that the new equity and synthetic warrants are only tradable on the OTC Market and this is not currently a market we are able to offer to clients. Below are extracts from the event prospectus which highlight the differences between the new warrant classes:
Option 1 – Equity Warrants
Warrants equivalent to up to 15 per cent of the nominal share capital of the Parent Company on a fully diluted basis, with an exercise price of 42.75p, and freely tradable (subject to certain restrictions) and exercisable from their issuance until 31st May 2022. The equity warrants will be afforded full anti-dilution protection in respect of their value but shall not be secured nor have any priority ranking as debt. Holders of equity warrants may elect for cashless exercise of all or any number of their equity warrants, in which case, the number of new shares they receive on exercise shall be reduced accordingly to account for the exercise price which would otherwise have been paid.
Option 2 – Synthetic Warrants
Synthetic warrants representing, in aggregate, a fee equivalent of up to 15 per cent, on a fully diluted basis, of the difference between £218,371,728.58 (being the value of the issued share capital of the Parent Company, on the basis of a value of 42.75p per ordinary share) and the market capitalisation of the Parent Company on the earliest of: (a) the calendar quarter-end date on which the gross leverage ratio of the Group falls below 3:1 (b) the calendar quarter-end date on which the new net leverage ratio of the Group falls below 2.5:1 (c) the maturity date of the senior secured debt facilities and (d) the date on which the senior secured debt facilities are repaid or prepaid and cancelled in full. The synthetic warrants will be secured and will rank equally with the indebtedness giving rise to the entitlement to the synthetic warrants, in the form of the super senior synthetic warrants and the senior synthetic warrants.
In simplified terms, the equity warrants can be exercised into new shares at a cost of 42.75p before 31st May 2022 and the synthetic warrants are non-exercisable and do not have an expiry date however they instead entitle the holder to a cash payment should certain criteria be met.
Both options still clear as mud to me...
The plot thickens (a bit)
Selftrade have just emailed me (having chosen the Synthetic Warrants)
Further to your recent election regarding the Premier Oil, please note that we have been advised that the warrants you have elected to receive cannot be held within your ISA. As a result of this, any warrants elected for will be received within your Dealing Account.
If you wish to amend your election, please note that the deadline for this will be Thursday 15th June 2017 at 3pm, if no response is received by this time we will proceed with your previous election and allocate any warrants received to your Dealing Account.
I got the same message. I presume that you can receive any proceeds into your dealing account, then, should you wish to, transfer the proceeds back to your ISA account.
I am still confused as to how the warrants work. I can see PMO is sweetening the deal for debt holders to extend the maturity by paying a fee, and increasing the coupon and "giving" warrants. You can then (if appropriate) sell the warrants or exercise them, and get underlying equity at 42.5p per share which is better than the current market price.
But are the warrants free or will there be a consideration for the warrants; this is the bit I am unclear on.
I have read very little of this, but the I think that the warrants are effectively compensating us. i.e. When we lent PMO some money, they originally promised to pay it back in 2020. Now, since they are skint, they are holding on to it for a bit longer (like it or not!) and you are getting compensated for waiting to be repaid. (Assuming they don't go skint in the process!)
I know little about warrants, but believe that they are much higher up the list of creditors.
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