Petropavlovsk Banks Agree to Relax Debt Conditions in Principle

Petropavlovsk Plc (POG)’s banks agreed to relax conditions on the gold producer’s borrowings, helping the company in its battle to refinance almost $1 billion of debt.

“The banks have given us non-binding but nonetheless positive relaxation on the covenants issue,” Chairman Peter Hambro said in a phone interview. “They’ve said they understand what we’re saying and doing is the right thing and they will give us a relaxation or holiday.”

Petropavlovsk surged by 14 percent, the biggest gain in more than two weeks, to 40.25 pence by 8:15 a.m. in London trading, paring its loss this year to about 45 percent.

The company’s debt has weighed on its shares since sales were hit by the steepest annual drop in the price of gold in three decades last year. Petropavlovsk, which lost 80 percent of its market value last year, previously said that it expected to breach so-called debt covenants and would be unable to repay $310.5 million of bonds in early 2015 without refinancing.

The company, with net debt of $924 million, has talked to bondholders it has identified owning $280 million of its convertible debt, Hambro said.

“They’ve all been very supportive,” he said. “Nobody’s been difficult. I think it will pass in an orderly fashion.”

First-half gold output rose 4 percent to 306,400 ounces and was sold at an average $1,386 an ounce, Petropavlovsk said.

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net Tony Barrett, Ana Monteiro

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