18th Feb 2015 09:22
LONDON (Alliance News) - The board of Petropavlovsk PLC warned Wednesday that it could face insolvency should its proposed refinancing plan not be passed by shareholders and urged shareholders to vote in favour of the plan, following a call to oppose the proposals from Sapinda Holdings BV Tuesday.
Sapinda, which claims to represent a group of shareholders with a 10.7% interest in the Russia-focused gold miner, said it plans to vote against the restructuring of Petropavolovsk's convertible bonds, and said that it believes other holders of a significant proportion of shares also support its position to vote against the proposal.
On February 2, Petropavlovsk said it had launched a refinancing programme, including a GBP155.1 million rights issue of new shares and a new five-year USD100 million convertible bond, intended to "secure the group's immediate future" and allow it to increase production in 2015.
However, Sapinda Tuesday that the proposal unfairly favours bondholders at the expense of shareholders, diluting them by 94% and issuing the new shares at a price of just 5p, 80% below Petropavlovsk's share price prior to the bondholder proposal.
Sapinda said it has signalled it is willing to inject a "substantial amount of money into the company as part of an alternative recapitalisation that is fairer for all shareholders."
Shares in Petropavlovsk are trading up 1.2% at 16.70 pence Wednesday morning.
The board of Petropavlovsk Wednesday welcomed Sapinda's interest in attempting to provide a refinancing solution, but said its approach does not include a "sufficiently details or funded proposal" that can be put to shareholders as a viable alternative to the refinancing plan.
It said that it had evaluated a proposal put forward by Sapinda in October of last year, but at the time it considered it to be unworkable.
"There was no detailed offer, no independently verifiable source of funding, no fully pre-emptive right for existing shareholders and it did not gain the support of the existing bondholders," Petropavlovsk's board said of Sapinda's proposal.
The board said it was "acutely aware" of the pressing time constraints and need for a shareholder vote to approve the current refinancing plan.
Should the refinancing not be passed there is a "very high risk that the company would be forced into an insolvency process, such as administration or liquidation, and that shareholders would lose their entire investment in the company," the board said.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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