Premier Oil 5% 2020

To disclose my interest, I am a holder.
To lose money at this level, 65, you have to believe that, if Premier goes bust two or three years out (it clearly is solvent today), after the £464 million of senior debt (at current exchange rates) is paid off in full, all the rest of the debt will be paid off at less than 65 pence in the pound. Significantly less than that, as the December interest payment will surely be paid, and most probably those due in 2016. I'm assuming that Solan produces oil, as expected.
Has anyone else done the sums and, if so, have I missed some big near term risk, other than a further significant fall in the oil price and a delay at Solan?

Comments

  • From memory I always thought the retail bond ranked equally with the senior bank debt? Can anyone confirm this.
  • To Brian: unsecured senior bond debt usually ranks below senior bank debt. Only if senior bonds are secured , for example through first call on property, are they pari passu with senior bank debt. The vast majority of senior bonds are unsecured.
  • "Premier Oil in new plea for debt relief" - appoints Rothschild, says Sun Times (Paywall)

    http://www.thesundaytimes.co.uk/sto/business/Industry/article1672776.ece?CMP=OTH-gnws-standard-2016_02_28
  • PREMIER OIL has recruited a top City bank to lead negotiations with its lenders after it warned that it could breach the terms of its $2.2bn debt.
    The company, which owns rights to a big reservoir in the Falkland Islands and pumps crude in the North Sea, is understood to have lined up Rothschild for the crunch talks — the second time in a year that the company has had to plead for relief from its lenders.
    Sources close to the situation said the banks may insist shareholders share the pain by putting money into a rescue rights issue later this year.
    Premier’s share price has collapsed by nearly 90% over the past 18 months, with the plunging crude price wiping out profits and raising concerns over its ability to pay back its loans. The shares closed on Friday at 41p, valuing the company at £207m — one-eighth of its outstanding debt.
    Premier lost $830m (£599m) last year. Last month it announced the $120m purchase of a group of North Sea fields from Eon. These will bring in badly needed cashflow to prop up its ailing balance sheet, but the deal is not likely to be enough to stop the company falling foul of its lending arrangements.
    Creditors and shareholders must still approve the takeover. The restructuring talks could start in earnest once the deal is closed.
    Premier warned last week that a breach was “likely to arise” at the end of June, when its banks next test the debt-to-earnings and interest-cover ratios that govern the loans.
    Its travails illustrate the carnage unleashed by the crash in crude price, which is down from $115 a barrel last summer to about $35. Tens of thousands of jobs have been lost in the North Sea while exploration levels have hit record lows.
    George Osborne is considering introducing deep tax cuts in the budget next month, but Tony Durrant, Premier’s chief executive, said a reduction “is not going to make much difference”. The North Sea is among the most expensive producing regions in the world.
    Last August Premier’s banks agreed to a temporary increase in the allowable debt-to-earnings ratio from 3 to 4.75 times.
    The company’s financial struggles are likely to lead to further delays in its $2bn Sea Lion development off the Falkland Islands.
  • Latest results from Premier Oil
    "Good progress is being made with the company's lending group over amendments to the medium term covenant profile and resetting of debt maturities. Premier expects negotiations to conclude and revised agreements to be implemented during H2 2016."
    Do we believe them and if so does this make the bond a buy?
  • I took the gamble and added some more this morning.
  • If Premier wanted to negotiate to extend the term of their ORM listed bond is this possible. I'm looking forward to getting my money back in 2020. I buy bonds at issue with plan of holding to maturity. However extending the term might be better than a default.
  • LPC-Lenders sell out of Premier Oil's syndicated loans

    http://www.reuters.com/article/premier-oil-loans-idUSL8N1D8582

    What could this mean for Retail Bond holders?
  • Premier Oil announced debt refinancing on Thursday. Retail bondholders were not represented in negotiations it seems. I have posted an initial write up on my new fixed income discussion board at -
    http://www.fixedincomeinvestments.co.uk/discussion/topic/premier-oil-debt-restructuring/
  • Mark,
    Thank you for this information, much appreciated
  • Hello
    Anyone have a similar issue as below?
    I bought PMO1 at issue with Barclays stockbrokers and they were all transferred to the new (awful) Smartinvestor platform. There must be many others who bought this retail bond through Barclays at issue.
    However, Barclays cannot seem to be able to hold the synthetic warrants(or any of the other alternatives offered) on the Smartinvestor platform.
    The warrants were part of the debt restructuring last June or July and I spent a fair amount of time trying to get a proper answer from Barclays but with little success as those other unfortunates who have accounts there will probably be aware. I know Barclays have a year from the restructuring to apply -

    from p. 52 of prospectus for the restructuring:

    A Scheme Creditor or a CDI Holder will be an “Unadmitted Scheme Creditor” or an “Unadmitted CDI
    Holder” (as applicable) if it does not submit an Election Form before the Forms Submission Deadline, subject
    to the Issuer’s discretion to admit Election Forms submitted after the Forms Submission Deadline but before
    the Election Adjustment Deadline.

    Unadmitted Scheme Creditors and Unadmitted CDI Holders will have up to 12 months from the
    Refinancing Effective Date to provide an Election Form to elect to receive Synthetic Warrants.
    Unadmitted Scheme Creditors and Unadmitted CDI Holders are not eligible to receive Equity Warrants.

    I read that as saying that anybody who didn’t submit an election (e.g. barclays) is indeed an “unadmitted scheme creditor”. and that barclays now have 12 months to submit an election form to get you some synthetic warrants (but it’s too late to get equity warrants).

    However, Barclays cannot give me any update on if they have applied or not or where they stand. I can just imagine that the year will pass and the right for the warrants will lapse!
  • edited January 22
    pdepp, I have exactly the same problem as you with the warrants (amongst numerous other complaints about SmartInvestor). SmartInvestor is dire. Please please make a formal complaint with Barclays, in my case they offered me £150 if i dropped it which i rejected. Thereafter they will ignore the complaint and then you can register it with the Financial Ombudsman. In my case Barclays also ignored the financial ombudsman until I chased them (the FO). The FO then appointed an agent to look into the case. I cant tell you what happens then, because my agent has made no progress either.
    I have also spoken to the FCA who refuse to say whether they are investigating Barclays over the Smartinvestor debacle.
    Surely the more people who complain, the more chance something will happen.
    You might also try writing to Alistair Thaw, the boss at SmartInvestor, I never got a reply but at least my letter is on record.
    I dont the think the guys at the top of Barclays are bent, just incompetent.

    Something I forgot to mention...Barclays told me that their platform cannot handle synthetic warrants, but they have until July to resolve the problem. This is true if they have a positive resolution. If they decide not to hold the warrants and recommend that you move to another provider, the deadline remains so we will have the period from their decision until July to move!
  • I also complained about my PensionTrader transfer to YouInvest, Barclays offered me £200 compensation, which I refused. I have lodged a complaint with the Financial Ombudsman.
  • @john & Paddy: A J Bell YouInvest were not able to hold the synthetic warrants either, and they were not able to hold the equity warrants within my ISA so they put them in my ordinary trading account.
  • It may be worth complaining using social media, if that avenue is open to you. They may respond better, as it's a more public way of complaining. Add something like #company name if using twitter
  • Hi All. I have only 5,200 of the bonds in my SmartInvestor ISA (it's awful, as everyone says) and the thought of reading up about the synthetic warrants and then fighting with Barclays appals me. Can someone please tell me what the warrants to which I would be entitled if Barclays did their job properly are worth - roughly. Maybe complaining and accepting compensation might be the more profitable action?
  • HB1. I agree that would be good to know, if there is anyone out there who has received them through another broker.
    I have spent many hours trying to get a sensible answer from Barclays. Yesterday, I was told that they are in the process of applying for the synthetic warrants. Of course, who knows if this is correct. My worry is that the period to apply for them lapses, if I am correct they have until July. Also if I recall correctly the strike is 42.75p so well in the money given sp about double that as has had a good run with oil price in last year.
  • You should have got 3.33% of warrants ie 10000 bonds would be 333 equity warrants, that give the right to buy PMO @42.75p. As PMO are 85p thats 85-42.75=42.25p x 333 = 140.69p = £14.069p per 1k bonds.............I think (ties in with numbers on my account) and happy to be corrected.
  • Ps above is equity warrants, which is what i selected to get
  • Hind, thank you for that!
  • I hold my equity warrants through Hargreaves Lansdown. I called today to try to sell them and I can't. I then asked if I could exercise them (and then sell the shares). Apparently I have to issue an instruction and then at some point (around the end of every month), somebody sits down and fills out the paperwork to send off to the registrars to exercise them and at some point after (who knows when precisely) the new shares will appear in my account. I tried to explain that these decisions are time-sensitive but got no response. I'm not satisfied with this service.
  • Have recently moved to HL after "Smart Investor" debacle, They are not anywhere nearly as good with price and execution as the Barclays of old were, but then the sterling market has also become illiquid, as commented elsewhere.
  • Thanks hind. Good to have an indicative value. And thanks pdepp for showing the way at Barclays. I will gird up my loins and go into battle. Depressing comments from Finn2 and Fang. Looks as if I should cross HL off my list of where to move to from Smartinvestor. Ah Well ...
  • Tales woe as to the time it takes to move out of Smart Investor" all over the papers today (F.T. & Times). Perhaps Barclays may eventually come back to their senses and resurrect what was the best platform out there. I for one would then wish to return. That is if MiFid II can be circumvented, part of the reason why they made the change. Wonder if it indeed it can, post Brexit, would be a rare example of Brexit doing some good.
  • For what my experience is worth am with HL - ex Barclays but left in 2012.
    HL were good - wrote in June re the scheme and September with the outcome - giving me 13 days to choose which warrants - took the Synthetics by default.
    Details provided by HL below for folks info - in other words we get a cash payout if the firm goes ropey again or the bonds mature or are repaid.


    “The Synthetic Warrants will confer on each Synthetic Warrant Holder the right to receive a payment in cash from or on behalf of the Issuer of a Proportionate Share of a fee equivalent of up to 15 per cent (reduced in accordance with ratio of Equity Warrants to Synthetic Warrants taken up) of the difference between £218,371,728.58 and the market capitalisation of the Issuer on the earliest of:

    the calendar quarter-end date on which the Gross Leverage Ratio of the Group falls below 3:1;
    the calendar quarter-end date on which the New Net Leverage Ratio of the Group falls below 2.5:1;
    the maturity date of the Senior Secured Debt Facilities; and
    the date on which the Senior Secured Debt Facilities are repaid or prepaid and cancelled in full.

    “The Synthetic Warrants will not be admitted to trading on any market or exchange.

    “The Synthetic Warrants will expire upon payment of the Synthetic Equity Growth Fee.” (Source: Official Prospectus, May 2017)

    I have been happy with their execution and I am fortunate to have professional real-time market data and access through my job.
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