19th Feb 2015 11:35
LONDON (Alliance News) - Petropavlovsk PLC Thursday said all of the propositions made by Sapinda Holdings BV have had "flaws" and do not take into account important information or provide enough detail to allow the company to evaluate its proposals.
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.
Sapinda, which represents a group of shareholders in the company with a collective 10.9% stake, then argued the proposal unfairly favours bondholders at the expense of shareholders, diluting them by 94% and issuing the new shares at a price of just 5 pence, 80% below Petropavlovsk's share price prior to the bondholder proposal.
Sapinda further argued that the proposed bondholder proposal would still leave Petropavlovsk with USD700 million in debt, and instead proposed that Sapinda could inject a "substantial amount of money into the company as part of an alternative recapitalisation that is fairer for all shareholders."
Petropavlovsk responded to Sapinda's alternative proposal by warning investors 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.
The board of Petropavlovsk said it welcomed Sapinda's interest in attempting to provide a refinancing solution, but said its approach does not include a "sufficiently detailed or funded proposal" that can be put to shareholders as a viable alternative to the refinancing plan, and said it had considered a similar proposal by Sapinda in October that was unworkable as well.
"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 on Wednesday.
On Thursday, Petropavlovsk said it has received a letter outlining Sapinda's proposals, but said the proposal has similar flaws to that put forward by Sapinda last year.
The Russian gold miner said Sapinda's proposals "does not take into account some of the important contractual and regulatory provisions to which the group is subject. In addition, neither the announcement made yesterday by Sapinda, nor the letter received by the company, provides sufficient detail to allow the company fully to evaluate the deliverability of the proposal or the time to act upon it."
"Furthermore Sapinda's proposal assumes agreement with bondholders on a transaction that is significantly different to that achieved so far," added Petropavlovsk.
"Accordingly, the company re-iterates that should sufficient shareholders vote against the resolutions so that they are not passed, due to the time restraints 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," said Petropavlovsk on Thursday.
Petropavlovsk shares were down 1.6% to 15.75 pence per share on Thursday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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