Freeport Disregards Lender Dissent in $2 Billion Anadarko Saleby
Company plans merger with subsidiary to allow for asset sale
Alternate plan adopted after bondholders object to deal terms
Freeport-McMoRan Inc. is pushing ahead with plans for a $2 billion asset sale to Anadarko Petroleum Corp. even after it failed to win creditor support for the deal.
The commodities producer will merge with a subsidiary to get around the obstacle thrown up by its bondholders, it said in a statement late Wednesday. But creditors say the move violates their agreement with the company, according to people with knowledge of the matter.
Freeport was initially seeking consent from creditors to change an existing credit agreement so that it could keep about $2.3 billion of the debt on its own balance sheet even as the assets shifted to the buyer. Instead, it will merge with its subsidiary Freeport-McMoRan Oil & Gas, the entity that issued the bonds, to pave the way for the Anadarko deal.
Some of the bondholders being represented by Paul, Weiss had already warned the company that this maneuver would violate the credit agreement governing the notes, people with knowledge of the matter said this week. Specifically, they point to language in the credit agreement that bars a company -- in this case the subsidiary -- from selling a substantial amount of its assets in one or more related transactions unless the debt is assumed by the buyer, the creditors said in a Sept. 19 letter.
Freeport’s legal advisers have already told lawyers representing some of the noteholders that the company believes the move is permitted under the indenture, Eric Kinneberg, a spokesman for the company said earlier this week.
Freeport has been struggling to lift earnings amid a two-year long commodities rout and had its credit ratings cut to junk earlier this year as it grapples with more than $18 billion of debt. The company announced the sale of its Gulf of Mexico assets to Anadarko this month in a move that would allow it to cut debt and clean up its balance sheet.
On Wednesday, S&P Global Ratings cut the company’s credit grade another level to three rungs below investment grade.