KrisEnergy shares surged yesterday after the firm said investors had backed its controversial debt restructuring plan, although doubts remain.
The stock jumped 2.5 cents or 16.67 per cent to 17.5 cents after the oil and gas explorer announced that the plan has so far met a favourable response from note holders, who are due to vote on the scheme on Dec 9.
The plan could result in KrisEnergy being debt-free in seven years - a boon for shareholders - but some note holders have called it "inequitable" and argue that the firm is being premature as the deal is not in the bag yet.
KrisEnergy, which is seeking consent from note holders to restructure $330 million worth of bonds, said that as of Tuesday it had received enough votes to meet the 75 per cent quorum ahead of next week's meeting.
It said that 75 per cent of the votes received were in favour of the restructuring.
But the firm is jumping the gun, said Mr Benson Tay, fixed income analyst at iFast Corp, which is representing some individual note holders. Mr Tay told The Straits Times: "The announcement... gives note holders the impression that the consent solicitation exercise is a done deal."
He pointed out that the final consent deadline is Dec 7, and there is still a chance that enough "no" votes could come in before then to block the restructuring. "We also represent a sizeable informal group of bond holders, some of which are institutions, which also intends to reject the proposed terms."
KrisEnergy needs more than 75 per cent of voting bond holders to agree to having their principal returned to them in 2022 and 2023 respectively, instead of in 2017 and 2018. This condition must be met before KrisEnergy can tap an up to $140 million preferential offering of zero coupon secured notes with detachable warrants, that major shareholder Keppel Corp has committed to subscribe to. DBS bank also needs assent before it grants it access to a US$35 million (S$49.87 million) bridge commitment.
To complicate matters, KrisEnergy must make a $4.06 million coupon payment on Dec 9. It has said that it needs the US$35 million bridge to make that payment, although some note holders are sceptical as the company also said it had US$37 million in unused sources of liquidity as at Sept 30.
If the coupon is not paid, it will trigger cross defaults on the group's other indebtedness.
Mr Tay said: "We reiterate our position that, of course, we want the company to survive. However, the proposed final terms are onerous to note holders given that it, in effect, entails a haircut to note holders, which includes a lengthy maturity extension, and yet still be subordinated to new financiers (Keppel)."
KrisEnergy has extended its early-bird consent deadline from Tuesday to 5pm on Friday to persuade more note holders to agree to the restructuring in exchange for a 0.5 per cent bonus payout on their principal.
Correction Note: An earlier version of this article stated that Keppel Corp will agree to commit to an equity injection of up to $140 million. This is incorrect. We are sorry for the error.