10 July 2015
IGas Energy plc (AIM: IGAS)
("IGas" or the "Issuer")
Bond Amendments & Change of accounting Year End
IGas has today provided summons for bondholder meetings for certain technical amendments to the terms and conditions of the secured and unsecured bonds. The proposed amendments will align IGas' accounting periods with our operating partners, to reflect the operational and financial developments of the business following the completion of the farm-out with INEOS Upstream Ltd ("Farm-out") and provide improved reporting for stakeholders.
The bondholder meetings have been called following completion of positive discussions with key bondholders, of whom a very high proportion have stated their intention of support. Those key bondholders represent 36% and 34% of the outstanding secured and unsecured voting bonds, respectively.
The bondholders' meetings will be held on 4th August 2015, and the Issuer expects the amendments to be documented and effective subsequently. Further background is described below and a copy of the Summons is available at www.stamdata.comand http://www.igasplc.com/investors/company-publications
BACKGROUND
The Issuer announced the completion of the Farm-out on 7 May 2015, and provided a trading update on 8 May 2015. As a result of the completion of the Farm-out, the Issuer benefits from (i) a stronger balance sheet, following the receipt of £30m Farm-out proceeds and (ii) a gross funded work programme of up to USD$285m from major partners including Total E&P UK Ltd, GDF Suez E&P UK Ltd and INEOS Upstream Ltd.
Following the trading update, final results for the year ended 31 March 2015 and dialogue with key bondholders, the Issuer intends to use this opportunity also to address requests made by bondholders for enhanced information provision. The Issuer now has a broader suite of operations and business partners and to support bondholders' continued investment in the business, the Issuer will move towards providing regular quarterly updates on production in addition to the semi-annual financial reporting.
The Issuer is also seeking a series of adjustments to the bond documentation in order to align it with its partners and reflect the operational and financial developments of the business.
These amendments will align the Issuer's reporting periods, budgeting and planning cycles with its partners, as well as provide the flexibility in the current oil price environment to manage its operations successfully going forward.
Change of accounting Year End to 31 December: The Issuer's current accounting year end is the 31 March; however, the Issuer's major partners file their accounts on a 31 December basis. Aligning the Issuer's reporting date will remove the inefficiency of preparing two sets of budgets. The Issuer will test covenants for the 12-month periods ending 30 September 2015 and 31 March 2016 under the current reporting. The Issuer will then move to covenant testing under the new accounting periods for the 12-month period ending 30 June 2016, and thereafter the Issuer will have aligned testing dates with the new June and December reporting schedule. The Group intends to publish unaudited financial information for the six months to 30 September 2015 and audited financial information for the 9 months to 31 December 2015. The first full-year audited accounts under the new reporting will cover the 12-month period ending 31 December 2016.
Net Leverage Covenant: The leverage covenant in the Bonds is calculated on a gross basis which ignores the Issuer's improved cash position following its farm-outs.The Issuer proposes to move to a net debt / EBITDA covenant, which would be more in line with the market. The net debt / EBITDA covenant would be 3.5 from and including the 12-month period ending on 30 September 2015, compared to the current gross debt / EBTIDA covenant of 4.0.
Exclusion of exceptional items for covenants: The Issuer has implemented a substantial cost reduction programme, the costs of which are not excluded in the current EBITDA definition. Excluding redundancies or reorganisation costs from the covenants will encourage the Issuer to continue to implement cost savings initiatives as and when required. This will also align the Issuer's bond documentation with the market, where excluding exceptional costs is customary.
Continued hedging policy in appropriate currency: The Issuer is already required to hedge a minimum of 60% of production. Where the Company holds GBP to cover GBP operating costs, there should be no requirement to hedge that position in terms of foreign exchange.
Establishment of a debt service retention account for the secured Bonds: In consideration of approving the amendments to the Bonds, the Issuer will agree to establish a debt service retention account for the secured Bonds.
The Issuer intends to pay a consent and administration fee of 0.50% to all bondholders within 10 days of the approval of the proposal.
ENQUIRIES
For further information please contact:
IGas Energy plc
Tel: +44 (0)20 7993 9899
Stephen Bowler, Chief Executive Officer
Ann-marie Wilkinson, Head of Communications
Jefferies International Limited (NOMAD and Joint Corporate Broker)
Tel: +44 (0)20 7029 8000
Sara Hale/Graham Hertrich
Canaccord Genuity (Joint Corporate Broker)
Tel: +44 (0)20 7523 8000
Henry Fitzgerald-O'Connor
Vigo Communications
Tel: +44 (0)20 7016 9570
Patrick D'Ancona/Chris McMahon
