Sterling Resources seeks waivers, amendments under 9% bonds due 2019

By Marisa Wong

Morgantown, W.Va., Oct. 22 – Sterling Resources (UK) plc is seeking to amend its 9% senior secured bonds due 2019, according to a notice from bond trustee Nordic Trustee ASA.

Sterling is asking bondholders to consent to changes and to grant some waivers under the bond agreement that would ensure the company retains sufficient liquidity to continue operations, avoids a payment default and can fully refinance the bonds by Feb. 29.

The company is also asking bondholders to consent to deferral of an upcoming installment payment.

Under the bond agreement, the issuer is scheduled to make an installment payment at 107.5% of par and an interest payment to bondholders on Oct. 30.

The interest payment due Oct. 30 will not be deferred, according to the notice.

If the proposal and waiver are approved, the issuer will pay an amendment fee of $1 million to bondholders on a pro rata basis.

Bondholders will vote on the proposal and waiver at a meeting scheduled for Nov. 6 in Oslo.

The resolution requires a two-thirds majority of the bonds represented at the meeting to pass, and in order to have a quorum at least half of the bonds must be represented at the meeting.

Background

The company expects to have a cash deficit of about $20 million at the end of October following (a) completion of a Romanian asset disposal in August, (b) payment of a postponed installment from April 30 at 107.5% of par, plus accumulated interest, of $24.8 million upon closing of the asset disposal, (c) payment of an installment at 107.5% of par and interest on Oct. 30 of $32.3 million and (d) allotment of $10 million for minimum liquidity from Oct. 31.

Sterling has retained MHW Associates Ltd. and Jefferies International as financial advisers to consider alternatives for a transaction that would result in the full repayment in cash of all amounts owed to the bondholders.

According to the bond trustee, the company has moved forward with several potential transactions but needs more time to negotiate agreements. The company is seeking the waivers and amendments to avoid a breach of the bond agreement.

The amendments include, among other things, amending definitions, adding provisions relating to the planned refinancing, restating financial covenants and amending events of default under the agreement.

The company issued $225 million of the bonds in 2013. The bonds 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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