Saturday 21 April 2018

Petroceltic granted temporary reprieve on €200m loan

Petroceltic chief executive Brian O’Cathain
Petroceltic chief executive Brian O’Cathain

Paul O'Donoghue

Irish oil firm Petroceltic has announced today that it has secured additional time to sell or rescue its business.

The company announced this morning an additional temporary waiver from its creditors as the explorer grapples with mounting debts.

In December the Dublin-based firm announced a strategic review of its operations, effectively putting itself up for sale. It said in a trading update that it had breached agreements relating to its debt pile. The company has debts of $217.8m (€200m) and cash balances of $28.1m, although most of this cannot be readily accessed as it is held in local currencies.

Lenders agreed to waive borrowing covenants but only until last Friday. The company announced this morning that its lenders have agreed to extend the waiver of its banking covenants for an additional two weeks, ending on January 29.

The waiver will allow Petroceltic to breach the terms of its loans. Petroceltic's creditors are also expected to confirm their willingness to extend further waivers in future to allow the company's strategic review to continue.

The company's main assets are secured against its loans. Most of its debts were invested in the potentially lucrative Ain Tsila field in Algeria.

In the December update Petroceltic admitted it does not have "certainty on liquidity beyond early January 2016". However, it added that its lenders confirmed their intention "to provide further conditional financial support to the group in the form of a limited advance of new funds." Its lending group is comprised of HSBC, the International Finance Corporation, NBSA Limited and Standard Chartered Bank.

It was reported yesterday that Petroceltic has recently appointed restructuring specialists at PwC to prepare for the possibility of an insolvency scenario. However, it is understood PwC has been working with the company for several months.

It is understood that while Petroceltic is preparing for the possibility of some form of insolvency, management are hopeful that some other arrangement, such as a sale, merger or equity raise, can be pursued instead.

Petroceltic's market capitalisation was just €61m as of close of business on Friday. The firm, like many of its peers in the exploration sector, has been hard hit by the collapse in oil prices.

Brent crude has fallen by more than 70pc from $115 a barrel in the summer of 2014 to below $30 a barrel.

Petroceltic and PwC declined to comment.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business