Twin Butte at Odds With Bondholders Seeking Better Salvage Deal

  • Firm plans receivership, debtholders pitch different proposal
  • Canadian oil producer says senior lenders to demand repayment

Investors in Twin Butte Energy Ltd. could be forgiven for being confused after two conflicting notions of the Canadian oil producer’s future emerged Tuesday evening.

The Calgary-based company said in a statement that it’s headed for receivership under Canada’s Bankruptcy and Insolvency Act after senior secured lenders indicated they intend to demand repayment of C$205.4 million ($157 million) of outstanding credit. Less than an hour later, a group of bondholders presented an alternate restructuring proposal they said would let Twin Butte stay in business by pursuing creditor protection and undertaking an asset sale, private placement and rights offering.

It’s the latest twist in a months-long saga for the small energy company, which has struggled to cope with its debt obligations more than two years into an oil market slump. The differing outlooks follow a rejection by dissident convertible bondholders on Monday of the company’s plan to sell itself. Twin Butte’s failure to get the deal approved triggered a default on its credit line.

Twin Butte said on Tuesday that it has waived a 10-day notice period for the enforcement of the credit facilities under the Bankruptcy and Insolvency Act and expects to be in court in Calgary on Thursday for the appointment of a receiver to oversee its assets and business, at which point the company’s directors would resign.

Rob Wollmann, chief executive officer of Twin Butte, didn’t immediately respond to an e-mail or phone message left outside of normal business hours on Tuesday.

Alternate Proposal

An ad hoc committee of unaffiliated senior debenture holders is instead arguing that the company should file for protection from its creditors under Canada’s Companies’ Creditors Arrangement Act. That would allow for a series of transactions so Twin Butte could emerge with “significantly reduced leverage and material interest savings,” according to a statement from the group. The bondholders said they outlined the proposal to a special committee of Twin Butte’s board after the failed takeover vote on Monday.

About 32 percent of bondholders and 76 percent of shareholders voted to approve the sale to a group consisting of Hong Kong and Canadian-domiciled Reignwood Group Co. and Horizon Holding Group, Twin Butte said in a statement on Monday. The company needed at least two-thirds of stakeholders from both groups to approve the sale.

Some bondholders fought the takeover initially announced on June 24, arguing the deal rewarded equity holders at their expense. Under the terms, shareholders would have received 6 Canadian cents per share, or C$21 million, while the convertible-debt holders would receive 14 percent of the face value of their securities, or C$12 million.

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