IGas Energy Plc (LON:IGAS) has launched initiatives that will reshape the UK shale gas group’s finances and capital structure.
The company is arranging a US$35mln injection of fresh funds from strategic investor Kerogen Capital, and it is also proposing a debt-for-equity swap with its lenders.
According to IGas, the company’s new structure will be sustainable in the current oil price environment and will allow it to capitalise on value accretive opportunities whilst maintaining its valuable carry agreements (some US$230mln of work to be paid by well-funded partners).
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The proposals will see a significant reduction in the group’s outstanding debt, but, it will also mean significant dilution for existing shareholders.
Precise details of the dilution to shareholders have not yet been determined, as the quantum of the debt-for-equity swap is still to be finalised.
It is, however, currently anticipated that there’ll be a partial equitisation of the group’s secured bonds (presently there’s US$125.6mln outstanding) and the group’s unsecured bonds (US$27.4mln) will be fully equitised.
The debt will be converted to equity with some discount to the par value of the bonds.
At the same time some US$13mln of bonds held by the company would be cancelled.
It is envisaged that the equity placing with Kerogen will be priced at around 4.5p per share (Tuesday’s close: 8.42p), and the company plans a further placing to offer other investors the opportunity to buy new shares at the same price.
IGas chief executive Stephen Bowler, in a statement, said: “This potential investment recognises the underlying value in the IGas group, both through its stable production assets, significant shale acreage and c.US$230m carry from its partners.
“Upon completion of the potential transaction, we would have a capital structure that we believe is sustainable in the current oil price environment and that will enable the company to capitalise on value accretive opportunities.
“We look forward to working with Kerogen Capital and our existing stakeholders to finalise the terms of the potential transaction."
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