Gulf Keystone Petroleum Limited (LSE:GKP) has told investors that 82% of its bondholders have so far supported the group’s debt restructuring proposal.
The Kurdistan based oil firm last month launched a US$500mln debt for equity swap to alleviate the group’s financial uncertainty, but it will diluted existing shareholders out of sight.
Today’s update follows a takeover approach from Middle East-focused Norwegian oiler DNO, which is offering US$300mln in cash and shares.
The cash component of the bid, US$120mln, will provide an “early exit” for former bondholders unable or unwilling to hold the firm’s equity.
Gulf Keystone previously responded to the DNO approach by saying it would not engage in any additional process that causes the company to be distracted from completing the debt restructuring.
It noted that the DNO proposal is conditional upon the successful completion of the restructuring.
And added it “continues to strongly recommend that shareholders vote in favour of the resolution to authorise the increase in the company's share capital” – which would enable the debt to equity swap to proceed.
Sam Wahab, analyst at Cantor Fitzgerald, in a note highlighted that Gulf Keystone had now met the required 75% threshold for acceptances and said the restructuring is proceeding as planned.
“This represents overwhelming support for the company’s proposed restructuring that will see its net debt position reduce from c.US$600m to US$100m.
“Whilst there will be significant dilution to existing equity holders, and in light of the recent approach from DNO (which was subsequently rebuffed) we are encouraged by GKP’s approach to retaining a proportion of value for shareholders as well as control over its own destiny.”
He added: “With an extremely challenging sector environment, particularly for operators in Kurdistan, GKP will now hope to engage the long term support of the KRG which has historically failed to clear domestic operators’ receivables positions in Kurdistan.”
--UPDATED, adds broker comments--