Arbil: Gulf Keystone Petroleum Ltd. bondholders are preparing for a potential debt restructuring after the oil producer’s cash holdings fell below an alert-trigger level in October, according to two people familiar with the matter.
GLG Partners, Sothic Capital Management and Taconic Capital Advisors are among distressed-debt investors who have banded together and hired Houlihan Lokey Inc. to advise them, said the people, who asked not to be identified because the matter is private.
The bondholders are organising as Gulf Keystone contends with late payments from the Kurdistan Regional Government and slumping oil prices. Notes issued by the company, which holds licenses to export crude from the autonomous Kurdish region in northern Iraq, are quoted near record lows.
Spokesmen for Gulf Keystone, GLG, Sothic, Taconic and Houlihan Lokey declined to comment on potential debt restructuring.
Bondholders agreed to a change of terms in April, when they also added a clause saying the company had to make an announcement when cash holdings were below $50 million for five consecutive days. The London-based company said in October that cash had fallen below this level.
The oil producer may be able to meet interest payments totalling $53 million due in April and October because it has started to receive more regular payments from Kurdistan, the people said. Still, refinancing $575 million of debt maturing next year will be difficult unless payments continue and oil prices rebound, they said.
The company’s $325 million of convertible bonds are at 21 cents on the dollar, according to data compiled by Bloomberg. Its $250 million of unsecured bonds are at 45 cents.
The Kurdish government, which manages the sale of oil extracted in the region, has paid $101 million to Gulf Keystone since December 2014, said William Hares, an analyst for Bloomberg Intelligence in London, citing company statements. There is still an arrears of $298 million, he said.
“These payments are an encouraging sign, though they remain insufficient to address outstanding arrears,” he said. “This will remain a concern as the company’s large bond maturities approach in 2017.”