Energy XXI Ltd.’s unsecured creditors led by Franklin Resources Inc. have approached the oil producer about restructuring its debt to give the company more time to ride out crude’s price plunge, according to three people with knowledge of the matter.
The creditor group is asking the Houston-based company to agree to a deal to convert their unsecured debt into second-lien secured notes, said the people, who asked not to be named because the conversations are private. In return, the lenders will agree to extend the maturities on the debt, they said.
Energy XXI, which has amassed $4.5 billion of debt -- most of it before crude prices plunged almost 50 percent over the past year -- is talking to the holders of about $1.3 billion of securities that mature in 2017 and 2018, the people said.
Greg Smith, a spokesman at Energy XXI, and Franklin’s Stacey Coleman declined to comment. San Mateo, California-based Franklin is Energy XXI’s biggest bondholder, holding more than $900 million, according to data compiled by Bloomberg.
Energy XXI, which hasn’t posted a profit since the first quarter of last year, is among a slew of energy companies that face a lending squeeze due to crude prices trading near a six-year low.
The company issued $1.45 billion of second-lien notes in March to pay down its borrowings after its asset-based revolving credit line was reduced to $500 million maximum capacity, according to a company presentation. The company paid 11 percent for the new financing.
The maturity on the revolver borrowings would accelerate ahead of the 8.25 percent and 9.25 percent notes if these notes are not paid down or refinanced 210 days before they mature, according to the filing.
Bruce Busmire, chief financial officer at Energy XXI, said in the filing the company’s liquidity was “enhanced” in the fiscal third quarter, with $725 million available after the paydown of the revolver debt before redetermination. The company continues to have “additional opportunity to reduce debt through third-lien” debt, Busmire added.
Energy XXI’s $510 million of 8.25 percent unsecured bonds due in 2018 traded at 69 cents on the dollar to yield about 24 percent at 3:29 p.m. in New York, down from 74.5 cents when the debt was announced early March, according to bond-price reporting system of the Financial Industry Regulatory Authority.
Shares rose 1.8 percent to $3.47 in New York, trimming an 83 percent drop over the past 12 months.