Gulf Keystone Bondholders Said to Ready Plan to Take Control

  • Debt swap may take place if company fails to find new funding
  • Kurdistan-focused oil explorer has been hit by crude slump

Gulf Keystone Petroleum Ltd. bondholders are preparing a plan that would swap some debt into equity to take control of the oil producer, according to people familiar with the matter.

Guaranteed and convertible bondholders are working on the plan to take the company if it fails to find substantial new funding, said the people, who asked not to be identified because the talks are private. Under the proposal, holders of $250 million of guaranteed notes due April 2017 would get a majority of the company, while convertible bondholders and shareholders would have smaller stakes, they said.

Gulf Keystone, which operates in the Kurdish region of northern Iraq, delayed payment of $26 million of debt obligations due this week as it seeks to restructure its finances. The London-based company has been hit by the slump in oil prices and previously erratic export payments from the Kurdistan Regional Government.

A spokesman for Gulf Keystone declined to comment on restructuring talks and potential new investors. The company can delay the overdue bond payments until early next month without risking default.

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Bondholders could deploy the plan if management fails to raise enough money to guarantee repayment of $575 million of notes due next year, the people said. Gulf Keystone has a market value of about $74 million, following an 86 percent stock rout in the past year, based on data complied by Bloomberg. The shares dropped 6.3 percent on Friday, the first decline this week.

Houlihan Lokey Inc. is advising a group of guaranteed and convertible bondholders including GLG Partners, Sothic Capital Management and Taconic Capital Advisors, people familiar with the matter said in February.

Officials at Houlihan Lokey, GLG, Sothic and Taconic declined to comment on the restructuring negotiations.

Gulf Keystone can delay payments on $325 million of October 2017 convertible notes due April 18 until May 2. Those on the guaranteed notes can be postponed until May 3. The convertible notes last traded at 17 cents on the dollar, while the guaranteed notes were at about 49 cents, according to Trace, the price-reporting system of the U.S. Financial Industry Regulatory Authority.

Gulf Keystone has said that the Shaikan wells in Kurdistan, which it operates with MOL Hungarian Oil & Gas Plc, need $71 million of investment to maintain current production levels of 40,000 barrels a day. Spending of $88 million is required to raise production to 55,000 barrels.

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