Canacol in Talks for Short-Term Loan as Restructuring Looms
(Bloomberg) — Canacol Energy Ltd. wants to negotiate a short-term loan from creditors as it tries to restructure its debt before its cash reserves run out, people familiar with the matter said.
The Canadian company, Colombia’s largest private gas producer, is in talks about so-called debtor financing, said the sources, who declined to be named because the talks have not yet been made public.
Canacol needs to close the deal quickly as production declines and losses mount, but such a loan could create friction among creditors because it would likely give new lenders the upper hand over others. In addition to its $500 million in dollar bonds, the firm has an outstanding secured credit facility with Macquarie, which is currently superior to bonds. It also has a revolving credit facility with the syndicated bank group that expires in 2027.
Canacol did not immediately respond to a request for comment.
Since a major pipeline contract expires in 2023, Canacol’s production has been falling steadily, reaching levels that triggered an acceleration clause in the Macquarie loan.
Despite its troubles, the company has repeatedly promised investors that it is solvent and has rejected the idea that it needs restructuring.
“They were really looking for their lucky shot and it never came,” said Daniel Guardiola, an analyst at BTG Pactual in Bogota. “Gasoline prices were rising rapidly, EBITDA production reached record levels, and yet they could not obtain financing from the markets. I think this is due to lack of credibility.”
Canacol announced on Nov. 19 that it had been granted creditor protection in Canada and filed for relief under Chapter 15 of U.S. bankruptcy law the following week.
Investment bank Houlihan Lokey is advising a group of bondholders. KPMG Inc. served as Observer in the process. According to documents published by , the banks retained Clifford Chance while law firm Gowling WLG advised the company during the main process in Canada.
After years of operational problems, fruitless exploration efforts and poor communication with investors, investors see a potential acquisition as their best hope for a recovery.
Ecopetrol CEO Ricardo Roa said this week that Canacol is seeking a sale, but did not elaborate on the current status of the talks.
“Canacol’s production and assets still have strategic value,” Seaport Global strategist Bevan Rosenbloom wrote in a Nov. 25 note. “Colombia has a structural deficit of natural gas and Canacol is the second largest producer.”
–With assistance from Giovanna Bellotti Azevedo, Vinícius Andrade and Maria Elena Vizcaino.
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