- Creditors to gain about 40% of new equity in the company
- Mexico's Alfa dropped bid for control of Pacific on Friday
Pacific Exploration & Production Corp. shareholders stand to lose everything under a debt-for-equity proposal that an independent committee of directors is set to approve this week, four people with knowledge of the matter said.
The bid from co-chairmen Serafino Iacono and Miguel de la Campa to salvage the beleaguered Colombian oil explorer is now the front-runner after Mexico’s Alfa SAB dropped a counteroffer on Friday, according to the people, who asked not to be identified because the information is private. A bid by Tyrus Capital still stands, they said.
Under the proposal, Pacific’s chairmen will receive 10 percent of the new equity in the Colombia-based driller in return for securing $400 million to $500 million in funding, with creditors set to gain about 40 percent of the equity, the people said. Chief Executive Officer Ronald Pantin would also gain shares under the deal, one of the people said.
Canadian private equity firm Catalyst Capital Group Inc. is backing the bid and is expected to provide the funds secured against the company’s assets, the people said. It would get the remaining 50 percent of the new equity, they said.
Pacific and Alfa declined to comment. “As we indicated in January, we are currently working with all stakeholders and advisers to make the company’s capital structure more suitable to current market conditions,” Tom Becker, a spokesman for Pacific, said March 17. Tyrus didn’t immediately reply to e-mails seeking comment on its offer.
Pacific, based in Bogota, failed to make bond interest payments in January, and on Monday said it would not make an interest payment due this month. It has struggled after a series of deals in recent years ballooned debt before oil prices plunged. The company’s grace period for the missing January payment expires on March 31.
Pacific, which trades in Bogota and Toronto, has seen its price collapse 76 percent in a year, to 76 Canadian cents on Tuesday, giving it a market value of C$240 million ($184 million).
Earlier this year, EIG Global Energy Partners offered to buy Pacific’s $4.1 billion in bonds but only secured about 6 percent of the notes in response. It subsequently altered the terms of the tender, proposing less money. EIG’s offer is still in place and the company has engaged with Pacific, said one of the people. EIG declined to comment.