1st Oct 2015 07:56
LONDON (Alliance News) - Caza Oil & Gas Inc shares plunged on Thursday morning after the company said it has had to secure an extension on its financing agreement with Apollo Investment Corp as it failed to meet the covenants in the arrangements.
Caza said that, on Wednesday, Apollo executed a Forbearance and Reservation of Rights Agreement under which it has restrained from executing its rights under its lending agreement with Caza after the AIM-listed oil and gas company failed to meet the covenants on the agreement ahead of the Wednesday deadline.
Caza previously had the deadline for it to achieve the necessary compliance with the covenants extended to Wednesday after it had failed to meet the requirements in June and in December 2014. The new extension takes the deadline for it to comply with the covenants to October 31.
Caza said it remains focused on securing new financing or a refinancing which will allow it to retire its debt to Apollo and which will provide it with sufficient funds to continue developing its Bone Spring play in the US. It has been considering all debt and equity financing options and asset sales with a view to achieving this.
The company said, as highlighted in its second quarter results in August, that is is in advanced talks with a potential financier and said those talks have progressed, though it said that given the number of conditions that would have to be met to secure new financing, there is no certainty that any deal will be sealed on acceptable terms.
It also said there remains a risk that Apollo will stop restraining itself from exercising its options under the lending agreement and could terminate the extension agreement by October 15, under the terms of the new agreement.
Should a new financing deal be secured, the company said it is likely to be an equity investment in the company which, given the current commodity price environment, would likely result in a significant dilution for the company's existing shareholders.
Caza shares were down 50% Thursday morning to 0.75 pence, the worst performer in the AIM All-Share.
By Sam Unsted; [email protected]; @SamUAtAlliance
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