3rd Mar 2016 12:21
LONDON (Alliance News) - Problem-plagued Petroceltic PLC Thursday said it is "not possible to give a firm recommendation" to its shareholders concerning the takeover offer from its substantial shareholder, Worldview Capital Management SA, stating uncertainty is rife throughout the business.
Worldview, which owns a 29.6% stake in Petroceltic, launched a takeover bid for Petroceltic through a subsidiary following a lengthy battle with the company, which included Worldview making an unsuccessful attempt to oust its chief executive and later making a series of accusations of corruption.
The cash bid of 3.00 pence per share for Petroceltic made by Worldview only values Petroceltic at GBP6.4 million - a significant discount to its current value.
Petroceltic shares were trading down 17% to 8.39 pence per share on Thursday, giving it a market capitalisation of around GBP18 million.
The day before the offer was launched, Petroceltic shares closed at 13.75 pence - meaning the offer is at a staggering 78% discount to that price, but Worldview believes the value of Petroceltic's equity is "close to zero", and has repeatedly highlighted concerns over the company's "precarious, and worsening, financial position".
Petroceltic Thursday said the main concern surrounding the offer is the absence of any information about what Worldview would do about the company's hefty senior bank facility should its offer be successful. Overall, Petroceltic remains in limbo, and said t cannot offer a recommendation to its shareholders at this time.
Petroceltic's senior bank facility currently stands at a significant USD230.0 million.
"The board therefore believes that the terms and conditions of the offer, combined with the current financial circumstances of the group, create significant uncertainty regarding the ability for the offer to be completed in accordance with its terms," said Petroceltic.
"Based on these factors the board has concluded that it is not possible to give a firm recommendation to all Petroceltic shareholders at this time to either accept or reject the offer once made," the company added. "Petroceltic shareholders are therefore recommended to take no action at this time in relation to the offer".
Following several attempts to change the management at Petroceltic, Worldview capitalised on the company's decision to launch a strategic review of the business in December by making that severely discounted offer.
Petroceltic placed itself up for sale, and is considering a potential merger, selling off some of its assets, or sourcing partners for those projects to help fund and progress them. Petroceltic is also scrambling to find a source of finance, as it looks to secure some form of debt financing in the already difficult environment.
On Thursday, Petroceltic said the strategic review continues, but said there is no guarantee another offer for the company will be made. With a substantial debt repayment due Friday, and no guarantee of another repayment extension, it could suggest Petroceltic has few options to choose from at the moment.
Petroceltic's lenders have been supportive throughout the strategic review, providing numerous short term waivers on the overdue repayments in the hope the company can find a solution to its problems. Currently, the waivers over its debt expires on Friday, but it is possible further waivers could be secured by then.
Again, uncertainty was the key word used by Petroceltic, which said although the lenders have said they would be willing to continue to support the company, there is no guarantee further waivers will be awarded.
"Should the company be unable to secure further waivers from its lenders, it may lead to the withdrawal of the financial support of the lenders and the requirement for the company to make full repayment of its senior bank facility, which the company is not currently in a position to satisfy," said Petroceltic.
Petroceltic also has little in cash to make any form of repayment to that USD230.0 million facility. Although its cash balance stands at USD33.4 million, USD26.4 million of that is held in local currencies and is not readily convertible - giving it an effective cash balance of only USD7.0 million.
Those same lenders have also provided conditional financial support to the company in the form of a limited advance of new funds and through allowing the company to retain a portion of the proceeds received from asset disposals. However, uncertainty remains moving forward.
"There is no certainty that the company will be able to secure further funding from its lenders or from other potential providers of capital. Should the company be unable to secure further funding on acceptable terms, it may be unable to continue the Strategic Review process and conclude any of the initiatives currently being undertaken as part of it, including the [Worldview] offer," said Petroceltic.
"In such circumstances, there could be no certainty that Petroceltic shareholders would realise any value from their holding of Petroceltic shares," the company added.
By Joshua Warner; [email protected]; @JoshAlliance
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