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Seven Energy Finance (IRSH)

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Wednesday 15 November, 2017

Seven Energy Finance

Capital Restructuring

RNS Number : 5449W
Seven Energy Finance Limited
15 November 2017
 

SEVEN ENERGY ANNOUNCES TERMS OF CAPITAL RESTRUCTURING

London, Lagos, 14 November 2017: Seven Energy Finance Limited (the "Company"), and its parent company Seven Energy International Limited ("Seven Energy", and its corporate group, the "Group"), today announces agreement on the terms of a comprehensive capital restructuring of the Group (the "Agreed Transaction") between: (1) Seven Energy; (2) the Company; (3) certain other members of the Group; (4) Savannah Petroleum PLC ("Savannah"); (5) lenders under the US$24.1 million term loan facility (the "Term Loan 1 Facility") provided to, among others, the Company (the "Term Loan 1 Lenders"); (6) lenders under the US$25 million term loan facility (the "Term Loan 2 Facility")  provided to, among others, the Company (the "Term Loan 2 Lenders"); (7) the holder (the "10.50% Noteholder") of the 10.50% Senior Secured Notes (ISIN: USG80688AC17) issued by the Company (the "10.50% Notes"); and (8) an ad hoc group of holders (the "AHG") of the 10.25% Senior Secured Notes (REG. S ISIN: XS1093755194; 144A ISIN: XS1093754387) issued by the Company (the "SSNs") who hold in aggregate approximately 40% of the total principal amount of the SSNs (such agreement in respect of approximately 90% of the aggregate principal amount of SSNs held by the AHG).  This transaction has been the outcome of several months of extensive and complex negotiations, whereby the AHG has been restricted from trading for over 6 months and trading in Savannah shares has been halted since early June 2017.

The Agreed Transaction

The key terms of the Agreed Transaction are set out in the term sheets (the "Term Sheets") and the high-level steps plan (the "Steps Plan"), which are scheduled to the Lock-up Agreement (as defined below). The Lock-up Agreement (as defined below) is available for download by holders of the SSNs (the "SSN Noteholders") only at https://sites.dfkingltd.com/seven. As part of the Agreed Transaction, it is intended that (among other things):

(i)              Savannah will acquire substantially all of the valuable assets of the Group, including, at its option, the Strategic Alliance Agreement (see below), which are to be transferred to Savannah, its subsidiaries, or an entity to be nominated by Savannah, subject to completion of a financial restructuring of the Group in accordance with the Term Sheets as summarised in paragraphs (iii)-(vii) below;

(ii)             new capital will be provided by Savannah with funding available for, amongst other things: 

-          operational working capital and the liquidity needs of the target Group;

-          cash consideration to be paid to selected creditors, including the SSN Noteholders (see below for further detail); and

-          costs associated with the Agreed Transaction.

(iii)            the SSN Noteholders will receive their pro rata share of (i) US$52.5 million in newly-issued equity in Savannah and (ii) an US$87.5 million cash payment, in consideration for the discharge of all US$318.2 million SSNs and release of claims against the entities being acquired by Savannah (together the "SSN Consideration") (with further principles set out in the relevant Term Sheet);

(iv)            in addition to the SSN Consideration, the SSN Noteholders shall also be offered the right to subscribe, on a pro rata basis to their holdings of SSNs, for US$25 million worth of newly-issued equity in Savannah for a total cash consideration of US$20 million (the "Equity Issuance"). The Equity Issuance shall be fully underwritten by VR Capital and each SSN Noteholder may specify an amount of shares up to its pro rata share it is willing to subscribe for as part of the Equity Issuance. SSN Noteholders who participate in the Equity Issuance shall also be entitled to a share, on a pro rata basis to their participation in the Equity Issuance, in a US$20 million New Accugas Holdco Facility (as defined in the relevant Term Sheet), for which (other than in certain circumstances) no cash consideration shall be payable by the SSN Noteholders (as described more particularly in the relevant Term Sheet and the Steps Plan);

(v)             Savannah may choose, in certain circumstances, to exchange entitlements in respect of the Savannah equity and the Equity Issuance into additional cash consideration (i.e. gross subscription price minus transaction costs resulting in a net cash value of 96c in the dollar) (as described more particularly in the relevant Term Sheet);

(vi)            the 10.50% Notes will be exchanged such that the 10.50% Noteholder will receive US$15 million of new notes issued by Accugas Holdco (as defined in the Lock-Up Agreement) and US$85 million of newly issued notes issued by Seven Uquo Gas Limited, in each case to be serviced and repaid in Nigerian Naira (converted from USD at the prevailing NAFEX rate) with extended maturities and lower debt service obligations than the 10.50% Notes (as described more particularly in the relevant Term Sheet and the Steps Plan);

(vii)           the Term Loan 1 Facility will be exchanged into a new US$20 million facility issued by Accugas HoldCo (as defined in the Lock-Up Agreement);

(viii)         the Term Loan 2 Facility holder will receive (i) US$4.4 million in newly-issued equity in Savannah and (ii) an US$7.3 million cash payment, in consideration for the discharge of the Term Loan 2 Facility and release of claims against the entities acquired by Savannah (assuming the SAA is not reinstated as referred to below, with further principles set out in the relevant Term Sheet);

The Agreed Transaction will result in a significant deleveraging and re-profiling of debt facilities across the Group's capital structure.

In addition, the Group continues to engage alongside Savannah in constructive discussions with certain other of the Group's financial creditors (including the lenders under the US$375 million term loan facility in favour of Accugas Limited (the "Accugas Lenders") as regards amendments to their financing arrangements with the Group with a view to agreeing the detailed steps required for implementation of the Agreed Transaction in accordance with the Steps Plan.

In relation to the Strategic Alliance Agreement (the "SAA") and the purported termination notice dated 31 January 2017, Seven Energy continues to engage in commercial discussions with Nigerian National Petroleum Corporation ("NNPC") and Nigerian Petroleum Development Company ("NPDC") with a view to reaching an agreement on the terms under which the notice of intention to terminate would be withdrawn. Whilst discussions are still ongoing, and there can be no certainty that a satisfactory resolution will be reached, Seven Energy anticipates that reinstatement of the SAA, which is held by Seven Exploration & Production Limited, will require a substantial front end cash payment with respect to accrued legacy costs and a working capital injection. The quantum of this is still subject to negotiation and agreement with NPDC, however it is likely that the net investment, including working capital, required will be up to US$200 million. Savannah and Seven Energy have agreed that the Agreed Transaction will proceed on the basis that the SAA is not acquired by Savannah. However, were a resolution to be reached in relation to the reinstatement of the SAA, Savannah would have the right to acquire the SAA. It should be noted that Savannah will not be acquiring Seven Exploration & Production Limited as part of the Agreed Transaction, and the Term Loan 1 Lenders, the Term Loan 2 Lenders, the 10.50% Noteholder and the SSN Noteholders, together with the other pari passu creditors, will maintain a residual claim over that entity.

The Lock-up Agreement

On 14 November 2017, Seven Energy and the Company entered into a lock-up agreement (the "Lock-up Agreement") with certain other members of the Group, Savannah, the Term Loan 1 Lenders, the Term Loan 2 Lenders, the 10.50% Noteholder and the AHG.

The Lock-up Agreement sets out the key terms on which the parties thereto agree to support and implement the Agreed Transaction, as well as the key terms of the Agreed Transaction itself. An implementation agreement, which will set out the detailed terms for implementing the Agreed Transaction, will also need to be agreed with all relevant stakeholders.

SSN Noteholders (other than the AHG, who have already signed) are being asked to accede to the Lock-up Agreement to signal their agreement to its terms and those of the Agreed Transaction. The Company urges those SSN Noteholders to consider the terms of the Agreed Transaction and accede to the Lock-up Agreement by way of an accession letter appended to the lock-up agreement (the "Accession Letter") as soon as possible in order to enable a timely and cost-efficient completion of the Agreed Transaction. The Company and Seven Energy strongly believe that the Agreed Transaction is beneficial for both the Group and its creditors.

If the Agreed Transaction is not implemented, and in the absence of continued forbearance and liquidity support from the Group's financial creditors, certain key Group companies are likely to have to enter into insolvency processes.

Fees payable to SSN Noteholders

If the Agreed Transaction is implemented, a fee (the "Lock-up Fee") comprising 0.75% of the total principal amount of the SSNs will be paid rateably to SSN Noteholders that are party to the Lock-up Agreement on the Record Date of the Schemes (as defined in the Lock-up Agreement) in respect of all SSNs held by them as at the Record Date of the Schemes that were locked-up by 5pm London time on 12 December 2017 (the "Lock-up Fee Deadline") (provided certain other conditions set out in the Lock-up Agreement are complied with including voting in favour of the Schemes).

Each SSN Noteholder that is not already a party to the Lock-up Agreement is encouraged to accede to the Lock-up Agreement as soon as possible and in any event before the Lock-up Fee Deadline to ensure that the SSNs held by such SSN Noteholder qualify as Lock-Up Fee eligible SSNs for the purpose of calculating entitlements to the Lock-up Fee as described above and in accordance with the terms of the Lock-up Agreement. 

Liquidity facility

In order to provide the Group with sufficient liquidity in order for it to continue to operate its business until the successful completion of the Agreed Transaction, Savannah has agreed to provide the Group with a "super senior" interim revolving credit facility of up to US$20 million. The provision of such funding, which is available to be utilised in three tranches, is subject to certain conditions, including consent of the Accugas Lenders to the granting by certain Group companies of security interests in connection with the facility.  

Next steps

A copy of the Lock-up Agreement (which appends the Term Sheets and the Steps Plan), the investor presentation and the Accession Letter are available for download by SSN Noteholders only at https://sites.dfkingltd.com/seven. SSN Noteholders who register for the site will be required to provide proof of holdings in order to obtain access to the password restricted area of the site.

The Company will host a briefing call for the SSN Noteholders outlining the Agreed Transaction and anticipated timeline, details of which are to follow this announcement. For queries please contact Joe Kaye, Group Head, Finance.

SSN Noteholders (other than the AHG) who agree to the terms of the Agreed Transaction and the Lock-up Agreement are requested to complete and return the form of Accession Letter as soon as possible and by the Lock-Up Fee Deadline if they wish to receive the Lock-Up Fee.

Executed Accession Letters should be sent to DF King, the Information Agent, by email to [email protected] (subject: Seven Energy Accession Letter).

Further details in relation to the Agreed Transaction will be announced in due course.

Operational Update

The Group's integrated gas business in the south east Niger delta has been delivering gas during the first 9 months of 2017 to the Ibom Power station, the Calabar power station and the Unicem cement plant at an average rate of 78 million standard cubic feet per day ("MMcfpd") (first nine months 2016: 80MMcfpd).

In September 2017, all conditions precedent to the long-term gas sales agreement for the supply of gas by Accugas Limited, an indirect wholly owned subsidiary of Seven Energy, to the Calabar Nigerian Integrated Power Project (the "Calabar GSA") were satisfied and the 20 year Calabar GSA became effective on 22 September 2017.  The Calabar GSA is supported by a World Bank Partial Risk Guarantee ("PRG"), which guarantees payments to Accugas for gas supply and is backed by the Federal Government of Nigeria and the International Development Agency of the World Bank.

Average gross oil production from the Stubb Creek and Uquo fields was 3,100 bopd for the period (first nine months of 2016: 1,900 bopd), with net entitlement to Seven Energy of 900 bopd (first nine months of 2016: 600 bopd).

As a result of the notice of intention from NPDC to terminate the SAA and whilst the Group continues to engage in good faith discussions with NPDC and NNPC with a view to having the notice revoked,  Seven Energy has received no liftings of oil from OMLs 4, 38 and 41 under the terms of the SAA since December 2015.

 

For further enquiries, please contact:

 

Seven Energy International Limited                                                                                      

Manish Maheshwari, Chief Executive Officer & Executive Director
Chris Thomas, Chief Financial Officer
Joe Kaye, Group Head, Finance

+234 1277 0600
+44 207 518 3850
+44 207 518 3850

 

D.F. King Ltd, Information Agent

125 Wood Street, London EC2V 7AN, United Kingdom 

Email: [email protected]

Telephone: +44 20 7920 9700

 

For more information on Seven Energy please visit www.sevenenergy.com.

Additional information about the Agreed Transaction is contained in the investor presentation available on the website at http://www.sevenenergy.com/investors/presentations/2017 and at https://sites.dfkingltd.com/seven.

About Seven Energy

Seven Energy, founded in 2004, is the leading integrated gas company in south east Nigeria, with upstream oil and gas interests in the region.  The Group's midstream gas infrastructure assets, focused in the south east Niger Delta, include the 200 MMcfpd Uquo gas processing facility and a gas pipeline network of 260 km with distribution capacity of 600 MMcfpd. Its upstream assets include licence interests in the Uquo Field and the Stubb Creek Field (south east Niger Delta), an indirect interest in OMLs 4, 38 & 41 through the SAA (north west Niger Delta) and licence interests in OPLs 905, 907 and 917 (Anambra Basin). The Group has its main offices located in Lagos and London.

 

Seven Energy Finance Limited is a wholly owned subsidiary of Seven Energy International Limited incorporated in the British Virgin Islands. The company is the issuer of the SSNs and the 10.50% Notes, both of which are listed on the Irish Stock Exchange.

 



Important notice

This notice contains selected information about the activities of the Company, Seven Energy and the Group as at the date of this notice. It does not purport to present a comprehensive overview of the Group or contain all the information necessary to evaluate an investment in the Company or any member of the Group. This notice should be read in conjunction with Seven Energy's other periodic and continuous disclosure announcements and filings, which are available at http://www.sevenenergy.com.

This notice is neither an offer to purchase nor a solicitation of an offer to sell securities. The request for accessions to the Lock-up Agreement is not being made to any person in any jurisdiction in which the making of such request would not be in compliance with the securities or other laws of such jurisdiction. Certain securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States, unless registered under the Securities Act or unless an exemption from the registration requirements set forth in the Securities Act applies to them. No public offering of the securities will be made in the United States and the Company does not intend to make any such registration under the Securities Act.

In the United Kingdom, this communication is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), (b) high net worth entities falling within Article 49(2)(a) to (d) of the Order and (c) other persons to whom it may be lawfully communicated (all such persons together being referred to as "relevant persons"). Any person who is not a relevant person should not act or rely on this communication or any of its contents.

Statements contained herein may constitute "forward-looking statements". Forward-looking statements are generally identifiable by the use of the words "may", "will", "should", "aim", "plan", "expect", "anticipate", "estimate", "believe", "intend", "project", "goal", "foresee", "continue" or "target" or the negative of these words or other variations on these words or comparable terminology.

Forward-looking statements involve a number of known and unknown risks, uncertainties and other factors that could cause the Group's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. None of the Company, Seven Energy or any Group entity undertake to publicly update or revise any forward-looking statement that may be made herein, whether as a result of new information, future events or otherwise.

This notice has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, as to and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information contained herein or any statement made in this notice. The notice has not been independently verified.

The Company, each member of the Group and their respective directors, advisers and representatives do not accept any liability for any facts made in or omitted from this notice. To the maximum extent permitted by law, the Company, each member of the Group and their respective directors, advisers and representatives disclaim all liability and responsibility (including without limitation any liability arising from negligence or otherwise) for any direct or indirect loss or damage, howsoever arising, which may be suffered by any recipient through use of or reliance on anything contained in or omitted from or otherwise arising in connection with this notice.

The information contained in and the statements made in this notice should be considered in the context of the circumstances prevailing at the time. There is no obligation to update, modify or amend such information or statements or to otherwise notify any recipient if any information or statement set forth herein, changes or subsequently becomes inaccurate or outdated. The information contained in this document is provided as at the date of this document and is subject to change without notice.

This announcement and the information referred to herein constitutes a public disclosure of inside information by Chris Thomas, Chief Financial Officer and Director of Seven Energy Finance Limited, under Regulation (EU) 596/2014 (16 April 2014).

 

 

 

 

 

This announcement has been issued through the Companies Announcement Service of

the Irish Stock Exchange.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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