Oil Producer Afren Misses Payment on $360M Note As Debt Restructuring Nears

NEW YORK ( TheDeal) -- Africa-focused oil explorer Afren has missed an interest payment on its 2020 bond and expects to default on the note next month, but said creditors had agreed not to demand the early repayment of about $1.65 billion of debt ahead of a restructuring planned for next month.

The London-listed company said on Wednesday, June 10, that it didn't pay $11.9 million of interest, due June 9, on the $360 million note, activating a 30-day grace period that it said would also pass without payment.

"While such non-payment will result in a default under the 2020 notes, this will not result in an immediate obligation to repay such 2020 notes or a cross-default [on the] 2016 notes or 2019 notes or other debt facilities," said Afren. "The company has received assurance from the ad hoc (bondholders])committee....that the committee has no current intention to take enforcement action."

Afren, which produces oil and gas principally in Nigeria, entered talks with creditors earlier this year after its earnings tumbled along with oil prices, leaving it unable to meet repayments on its bonds and bank loans.

The decision to default on the 2020 note means that Afren has now defaulted on all three of its bonds. The company last month missed a $12.8 million payment on a $250 million note due in 2019, and in March defaulted on a $324 million 2016 note when it missed a $15 million interest payment. The defaults leave the company open to demands for accelerated repayments, though Afren said that creditors had agreed to waive that option while they wait for a restructuring to complete.

Under terms of that restructuring, bondholders have agreed to swap $934 million of bonds and accrued interest for two $350 million high-yield notes, due 2019 and 2020, and 80% of the company's equity. Afren will also issue a new $369 million high-yield note, due in 2017, and further dilute existing shareholders by selling the holders of the new note shares equal to 50% of the group's capital after the debt-for-equity swap.

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