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EIG Global Energy Partners is crying foul after its restructuring plan for Pacific Exploration & Production Corp. was rejected this week in favor of another bid by private equity firm Catalyst Capital Group that was spearheaded by Pacific’s co-chairmen.
“EIG’s offer remains highly superior both to the company and its creditors,” R. Blair Thomas, EIG’s chief executive officer, said in a letter addressed to Pacific’s board of directors that was obtained by Bloomberg.
The Catalyst-backed plan beat out five other bidders, including EIG, Bogota-based Pacific said Tuesday. Its restructuring plan, which included $500 million in debtor-in-possession financing, is expected to close by the end of the third quarter and reduce Pacific’s debt by about $5 billion, the company said.
The Catalyst-funded winning bid was spearheaded by Pacific’s co-chairmen and founders, Serafino Iacono and Miguel De La Campa.
“Creditors made a decision that involved various factors that included execution risk, business plans and strength of the counter-party,” Peter Volk, Pacific’s general counsel, said in a telephone interview Tuesday. “The creditors dealt directly with the various parties that proffered a bid.”
Thomas argued in the letter that EIG’s restructuring plan for Pacific would give the company an implied equity valuation and enterprise value more than 36 percent and 28 percent higher than the Catalyst bid, respectively. He said the recovery for noteholders and the banks would have also been about 47 percent and 67 percent higher, respectively.
Thomas also said the Catalyst bid underfunds Pacific and relies on cutting off additional investment and possibly jobs. He said that, throughout the process, EIG was told that the Catalyst bid was supported by the majority of Pacific’s creditors, partly because their interest would be diluted if the oil producer was fully recapitalized.
Most creditors EIG spoke to didn’t agree the Catalyst offer was the best, Thomas said.
“Based on our direct discussions with creditors, most recognize that EIG’s offer provided a superior return for them and a better outcome for the company,” he said in the letter.
“Many reported that other offers submitted to the company were also superior to the Catalyst/co-chairmen bid. However, they also felt early on in the process that the Catalyst/co-chairmen deal was a foregone conclusion given the dynamic between the company, the co-chairmen and Catalyst, on the one hand, and other bidders, on the other,” he added.
EIG remains ready to engage with the company on the terms of its proposal, Thomas said. He also urged the board of directors and the company’s creditors to independently consider the alternatives presented to the company.
“We believe the most important criteria are that the company is fully capitalized, able to stabilize production and reserves, avoid value-destructive asset sales and be able to grow once again,” he said.
A spokesman for EIG declined to comment on the contents of the letter. Pacific declined to comment beyond Volk’s remarks Tuesday. A representative for Catalyst was not immediately available for comment.