• EIG Global Said to Reboot Offer for Colombia’s Pacific E&P

  • Bloomberg
    14 January 2016

    (Bloomberg) -- EIG Global Energy Partners is planning to seek to buy control of Pacific Exploration & Production Corp., about six months after retreating from a takeover attempt of the struggling Colombian energy company, people with knowledge of the matter said.

    Harbour Energy Ltd., an investment vehicle EIG set up in 2014 to buy energy assets, is preparing to start a tender offer for most of Pacific’s debt, which would give it the leverage to force the company into bankruptcy in Canada, where it trades, said the people, who asked not to be identified because the information is private.

    Harbour plans to offer about $1 billion for at least 80 percent of four tranches of Pacific’s senior bonds in a tender offer that could commence as soon as this week, the people said.

    Harbour would offer a premium to holders of the notes, which traded at an average 15 cents on the dollar as of late Wednesday.

    Pacific, based in Bogota, is one of Latin America’s largest energy explorers, producing the equivalent of about 150,000 barrels of oil a day from fields in Colombia, Brazil, Peru and elsewhere, according to a November investor presentation. The company was known as Pacific Rubiales Energy Corp. until it changed its name in August.

    A spokesman for Pacific didn’t immediately answer a call to his office seeking comment outside regular business hours, while representatives for EIG and Harbour Energy declined to comment.

    Prices, Debt

    Harbour and Mexico’s Alfa SAB withdrew a bid -- valued at one point at as much as $1.7 billion -- for Pacific after the company’s largest shareholder spurned their offer. The stock has plunged 76 percent since Harbour and Alfa announced their decision to walk away from the deal, with Pacific’s market value falling to about C$398.3 million ($277 million) as of Wednesday’s close from C$1.65 billion in July.

    Like all explorers, Pacific is reeling from the rout in oil prices. Its particular problems stem from accruing too much debt in recent years by making acquisitions and investing heavily in infrastructure. Another issue: Its license to drill in Colombia’s Rubiales field, the source for more than a third of its production, expires in June.

    Pacific retained Lazard Ltd. in December to negotiate with its bank lenders.

    "Its debt is far far too high in this commodity environment,” Darren Engels, an analyst with FirstEnergy Capital Corp. in Calgary that covers that company, said by phone. “I have a target price of zero on the name."

    While the company has been seeking to stave off bankruptcy by selling pipelines and other infrastructure to raise cash, that may not be enough, Engels said, because the value of those types have assets have declined along with commodity prices.

    Harbour is working with Citigroup Inc. to manage the tender offering, according to the people familiar with the matter. If it succeeds, within weeks Harbour would seek to sponsor Pacific in a restructuring under Canada’s Companies Creditors Arrangement Act, the people said. It would provide additional financing to continue operating and handle negotiations with its other creditors, including the banks that hold its roughly $1 billion revolving credit line, the people said.

    EIG, based in Washington, raised $6 billion in 2013 for its most recent fund. It paid about $520 million in 2013 to buy an entity developing the Port of Acu in Brazil from former billionaire Eike Batista.