Sterling Resources announces meeting to vote on changes to 9% bonds

By Marisa Wong

Madison, Wis., April 23 – Sterling Resources (UK) plc is calling a bondholders’ meeting on May 8 to consider changes to its 9% senior secured bonds, issue 2013/2019, according to a notice from trustee Nordic Trustee ASA.

On Dec. 12 the company had amended the bond agreement, originally dated May 2, 2013, to suspend payments to a debt service retention account until April 28, as previously reported.

The issuer forecasts potentially insufficient available liquidity to make the interest and installment payments due on April 30.

As a result, the company is seeking ways to strengthen its balance sheet and improve its liquidity, including selling all of its Romanian assets to Carlyle International Energy Partners for $42.5 million.

However, the asset sale will not be completed by the April 30 payment date, and the company is expecting a cash deficit of about $32.7 million.

The company is therefore proposing further changes to its bonds including, among other things, the following:

• Deferral of the installment due April 30 to the earlier of Oct. 30, 2015 and as soon as possible once the company completes its sale of Romanian assets;

• Temporary release from monthly payments to the debt service retention account and permanent one-month deferral in monthly transfers to the debt service retention account;

• An increase of installment premiums to 107.5 from 105 beginning on and after April 30, provided that the final installment due at maturity remains at par;

• An increase in the interest rate to 14% from 9%, effective Nov. 1, 2015;

• An increase in the prepayment premium, with the outstanding bonds redeemable at 107.5 for the remaining term upon a call option exercise or a mandatory prepayment event; and

• Temporary amendment to the liquidity covenant. From April 30 to Oct. 30, 2015, the minimum liquidity requirement will be $5 million. The minimum requirement will revert to $10 million from Oct. 31, 2015 onwards.

In addition, the company is seeking a waiver. The time needed to implement the proposal requires that the company obtain a waiver relating to some terms of the bond agreement for a specified period.

To approve the proposal, bondholders representing more than two-thirds of the bonds represented at the meeting must vote in favor of the resolution. In order to have a quorum, at least half of the voting bonds must be represented at the meeting.

The company will pay an amendment fee totaling $3 million on a pro rata basis to bondholders if the proposed changes are approved.

The company will pay an additional fee if the sale of its Romanian assets is delayed.

The issuer said it believes that, if approved, the proposal will ensure that it retains sufficient liquidity to continue operations until Oct. 30, 2015.

The notes are guaranteed by parent company Sterling Resources Ltd., a Calgary, Alta.-based oil and gas company with assets in the United Kingdom, Romania, France and the Netherlands.

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