Lone Pine Resources Inc. (NYSE: LPR) is working to restructure senior notes and a $500 million credit facility to avoid potentially entering bankruptcy.
The Calgary, Alberta-based oil and gas exploration and development company, on Aug. 15, has a $10.1 million interest payment on $195 million of 10.375 percent senior notes due 2017. If Lone Pine misses the interest payment and is not able to pay within 30 days, it will default on the notes, and about 25 percent of the noteholders can demand payment in full.
That default could also lead to a cross-default on the company’s $500 million credit facility. The loan is from a syndicate of banks led by JPMorgan Chase Bank NA, Toronto Branch.
The credit facility matures on March 18, 2016, but Lone Pine and the bank agreed to an amendment earlier in 2013. The agreement raised the debt-to-Ebitda ratio allowed under the loan to 5.75:1, from 4:1, for the quarter ended June 30. On June 30, Lone Pine’s debt to Ebitda ratio was 5.4:1.
For the quarter ended Sept. 30, the ratio reverts back to 4:1. Without an additional amendment to the facility, Lone Pine won’t be in compliance with the credit agreement.
If Lone Pine is unable to restructure the notes, it may not have enough money to continue operations and could be forced to seek protection under the Canadian Companies’ Creditors Arrangement Act and either Chapter 11 or Chapter 15 of the U.S. Bankruptcy Code, the company says in an Aug. 8 filing with the U.S. Securities and Exchange Commission.
The uncertainty surrounding the note restructuring is causing substantial doubt about Lone Pine’s ability to continue as a going concern, or without the threat of liquidation, the company says in the SEC filing.
As of Aug. 2, Lone Pine had $178 million in borrowings under the credit agreement and $10 million in cash. As of June 30, the company had an accumulated deficit of $814.5 million, and its adjusted Ebitda decreased $27.6 million for the six months ended June 30.
Lone Pine’s oil producing properties are location in Alberta, British Columbia and Quebec. The company faced decrease sales volumes for both natural gas and oil, according to the SEC filings.
A call to Lone Pine was not immediately returned.
For the last edition of Turnaround Tuesday, see “Struggling Avantair Faces Involuntary Bankruptcy.”
For more struggling companies, see Mergers & Acquisitions’ Distressed Company Watch List.