Worldview Capital, the dissident shareholder of Petroceltic International that says it will bid £6.4 million (€8.1 million) for the troubled exploration outfit, is understood to have held talks with Petroceltic's bankers seeking a deal on the Irish company's debts of more than $200 million.
Worldview-owned Sunny Hill, a Cayman Islands-registered company, yesterday indicated it intends to make an all-cash offer for the shares of Petroceltic, which is currently unable to meet repayments on its loans.
It has a waiver on its repayments from its banks that expires next Friday. If a deal hasn’t been hammered out on Petroceltic’s future by then, it will need an extension to the waiver or it could slip into default.
Sunny Hill says it will offer 3 pence in cash per share for Petroceltic, a lowball price that sent the explorer’s share price tumbling more than 40 per cent on Friday. It closed in London at 10.5p per share.
Petroceltic did not reject the Sunny Hill offer, but instead urged shareholders not to take any action. A more detailed response is expected early next week.
It is believed that some of Petroceltic’s major shareholders have indicated they will not accept the Worldview bid, although the attitude of the company’s lenders to Worl;dview’s approach could be crucial.
Petroceltic’s assets
The banks have security over all of Petroceltic's assets, including its prime asset, Ain Tsila, a massive gas field it is developing in Algeria. If the banks were to appoint administrators, the shareholders might walk away with nothing unless a white knight bidder emerges.
Worldview, a 29 per cent shareholder in Petroceltic, has been in dispute with the company’s board for more than a year and has repeatedly tried to oust management and the board.
Petroceltic, stymied by Worldview in terms of raising fresh capital, put itself up for sale in December, appointing Bank of America Merrill Lynch and Davy Corporate Finance to talk to potential buyers after a breach of covenants.
Angelo Moskov, director of Sunny Hill and chief executive of Worldview, said the offer provided Petroceltic shareholders with an all cash exit from "a high risk, distressed investment, against the background of unprecedented uncertainty in the oil and gas sector."
“The directors of Sunny Hill believe that the value of the equity in Petroceltic is close to zero, given the parlous financial position of the company,” it said.
Flush out other bidders
Most analysts said they expect the bid to be rejected.
BMO said the offer materially undervalued Petroceltic’s assets and future potential, while Numis suggested it believed the bid was designed to flush out any other potential bidders. Elsewhere, Cenkos said most shareholders would likely see the offer as “deeply insulting”.
“With the current price being 18 pence, not many holders are likely to be willing to hand over any value to Worldview,” said Cenkos in a note to investors.
“It is somewhat ironic, given that Worldview has been instrumental in destroying much of the value in PCI with its endless agitating distracting management from actually focussing on moving the business forward. We expect this to be roundly rejected, but it is another unwelcome distraction,” it added.
