IGas looking at $35m capital injection from Kerogen Capital

IGas Group updated the market on its previously-flagged restructuring options on Wednesday, confirming it was looking to proceed with a significant injection of capital.

The AIM-traded firm had announced on 29 December that it was in “well progressed discussions” with a strategic investor in respect of its capital restructuring options.

It confirmed on Wednesday that those discussions related to a potential investment of $35m of cash equity from Kerogen Capital, dependent on the successful restructuring of the company's secured and unsecured bonds.

The company would also seek to raise additional equity funding, and existing shareholders will be given the opportunity to participate in this additional fundraising, the board said, with the placing price expected to be around 4.5p.

IGas said it believed the new capital structure would be sustainable in the current oil price environment and would enable it to capitalise on value accretive opportunities whilst also maintaining its valuable carry agreements, for the benefit of all stakeholders.

The potential transaction would be subject to a number of approvals, including shareholder approvals and secured and unsecured bondholder approvals as well as final approval by the strategic investor.

It would also be expected to result in a significant reduction in gross outstanding debt and a significant dilution of the existing shareholders, the precise extent of which will depend on a range of factors.

The board said that, at present, the potential transaction contemplates that the third party outstanding secured bonds - currently $125.6m - would be restructured via partial repurchase for cash, a partial equitisation of the secured bonds and the remaining balance to be exchanged into new secured bonds with amended commercial terms and extended maturity.

Additionally, the third party outstanding unsecured bonds - currently $27.4m - would be fully equitised.

The repurchase and equitisation of secured and unsecured bonds would be subject to certain discounts to the par value of the bonds, and the company -wned outstanding secured and unsecured bonds - currently $10.5m and $2.6m respectively - would be cancelled in full.

“This potential investment recognises the underlying value in the IGas Group, both through its stable production assets, significant shale acreage and $230m carry from its partners,” said chief executive Stephen Bowler.

“Upon completion of the potential transaction, we would have a capital structure that we believe is sustainable in the current oil price environment and that will enable the company to capitalise on value accretive opportunities.

“We look forward to working with Kerogen Capital and our existing stakeholders to finalise the terms of the potential transaction."