Afren Announce Launch of the Proposed Debt Restructuring and Refinancing

Afren Announce Launch of the Proposed Debt Restructuring and Refinancing

Afren plc (“Afren”, the “Company” or the “Group”), (LSE: AFR) announced the publication of a prospectus and circular to shareholders relating to its proposed Restructuring, including the Open Offer to shareholders, the receipt of an additional US$148 million in net cash proceeds and the proposed restructuring of the Company’s outstanding Notes. The Directors believe that the Restructuring is in the best interests of the Company and for the benefit of all stakeholders.

Commenting, Egbert Imomoh, Chairman of Afren plc, said:
“Afren Shareholders have been through an incredibly difficult period in the life of the business, and the next steps, whilst complex, are essential if we want to successfully emerge from this period on a value growth trajectory. I am clear that the only viable course of action for the business is to progress through the proposed refinancing process; it offers the only secure route to relieve the unsustainable debt burden, and support Afren’s recovery. ”

Alan Linn, CEO of Afren plc, said:
“I believe Afren has significant potential within its core Nigerian portfolio which will enable us to successfully emerge from this period and provide growth to all shareholders. The recommended restructuring, combined with the open offer, is the only viable opportunity for our shareholders to realise any value from their investment in the company. I urge all Afren shareholders to recognise this fact and vote to retain their active interest in the company by voting in favour of the proposed debt restructuring and refinancing.”

SHAREHOLDERS SHOULD VOTE IN FAVOUR OF THE RESTRUCTURING
In the opinion of the Directors, voting for the Resolution and authorising the implementation of the Restructuring will:

Provide Existing Shareholders the only opportunity to realise value and participate in the recovery of the Group
Provide Existing Shareholders an opportunity to participate in the Open Offer to increase their ownership position on favourable terms
Improve the capital structure of the Group to provide it the time to implement its business plan and grow the value of its assets
Prevent a formal insolvency filing
If Shareholders do not approve the Resolution at the General Meeting, Existing Shareholders have no prospect of any value. Upon a No vote:

The restructuring will still proceed without delay

The amount of debt will increase by approximately US$266 million immediately as compared to a Yes vote and the interest rates on the Group’s new debt will cause outstanding debt to increase significantly. There is no value for shareholders unless and until all of this debt is repaid

Holders of the New Senior Notes will have security over all of the Group’s operating subsidiaries

The Company will be required to have entered into an agreement by no later than 31 December 2016 to sell all of its assets. These assets can be sold to any party, including the Noteholders, and can be completed with or without shareholder approval.

The Directors consider that if Shareholders do not approve the Resolution at the General Meeting, the Shareholders would be unlikely to receive any proceeds from the sale of the Group or the required disposal of the Group’s assets or other return of income or capital by the Company, and therefore the Shareholders would be unlikely to see any return of their current investment.

In the Board’s opinion, the Restructuring, including the Open Offer is in the best interests of Afren and the Shareholders taken as a whole. Accordingly, the Afren Board unanimously and strongly recommends Shareholders to vote in favour of the Resolution to be proposed at the General Meeting, as all Directors have irrevocably undertaken to do in respect of their own beneficial holdings of Existing Shares, amounting to 6,640,839 Existing Shares and 0.6% of the total number of votes available to be cast at the General Meeting.

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Terms of the Restructuring

The principal components of the Restructuring comprise:

  1. the implementation of a scheme of arrangement in respect of the Existing Notes, including:
    the issue of approximately US$369 million of new high yield notes due 2017 to refinance and repay the Bridge Securities and to provide an additional US$148 million in net cash proceeds to the Group
  2. ;

  1. the conversion of approximately US$234 million of the Existing Notes (representing 25% of the 2016 Notes, the 2019 Notes and the 2020 Notes) into new Ordinary Shares in the Company, representing 80% of the existing issued share capital; and
    the remainder of the Existing Notes to be cancelled and reissued in equal amounts of approximately US$350 million each of new notes due December 2019 and December 2020 respectively, with an annual interest rate of 9.1%;
  1. the issue of additional new Ordinary Shares, equal to 50% of the issued share capital of the Company following the Debt for Equity Swap described above, to holders of the New Senior Notes;
  1. the issue of up to £49.2 million (approximately US$75 million) of new Ordinary Shares by way of an open offer to Shareholders at 1 pence per Open Offer Share;
  1. the issue of new Ordinary Shares, equal to 10% of the fully diluted share capital of the Company following the completion of the Open Offer, to holders of the New Senior Notes in order of priority of their agreement to subscribe for the New Senior Notes;
  1. the issue of new Ordinary Shares, equal to 5% of the fully diluted share capital of the Company following the completion of the Open Offer, to the holders of the Bridge Securities in partial repayment of the Bridge Securities;
  1. the entry into an amended term facility with the Ebok Lenders, including to extend the period for repayment of the US$300 million Ebok Facility until June 2019; and<
  1. the entry into an amended loan agreement with the Okwok/OML 113 Lender, including to extend the period for repayment of the US$50 million Okwok/OML 113 Facility until June 2019.

These summary highlights should be read in conjunction with the further details of the Restructuring, which are set out below.

The Restructuring will be implemented by means of a scheme of arrangement of the Existing Notes under the Companies Act 2006. The terms of the Restructuring, but not its implementation, are also subject to the approval of Shareholders in general meeting.

Information on the proposed refinancing is available at

Source: www.afrenegmvote.com

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