LONDON, July 14 (Reuters) – Kurdish oil producer Gulf Keystone will be taken over by its bondholders, including distressed-debt funds, after the firm proposed to swap $500 million of debt for shares, effectively wiping out its equity shareholders.
The London-listed firm said on Thursday current shareholders, which include Capital Group, Prudential, Barclays and BlackRock, would be diluted to 5 percent ownership after debt conversion into equity.
The London-listed company has been struggling since earlier this year to meet bond interest payments as weak oil prices and arrears for oil exports from the Iraqi Kurdistan government have crippled its balance sheet.
Sources close to the company and bondholders said Sothic Capital, a London-based fund led by former distressed specialists from JP Morgan, was among the key bondholders who would end up with a significant stake in Gulf Keystone.
Sources said other significant bondholders who would own large chunks of equity in Gulf Keystone are GLG Partners, part of hedge fund Man Group, and Taconic Capital, an event-driven investment fund.
Sothic did not respond to telephone calls. GLG and Taconic were not immediately available for comment.
As a result of the proposed restructuring, which will require formal approval by shareholders and bondholders, the firm's debt will fall to $100 million from the current $600 million of guaranteed and convertible bonds maturing in 2017.
The holders of the $250 million guaranteed bond will retain $100 million of reinstated notes and receive 65.5 percent ownership of Gulf Keystone equity.
The owners of $325 million in convertible bonds will receive 20 percent ownership of Gulf Keystone. The firm also hopes to raise $20-$25 million via a new open share issue.
Gulf Keystone said Capital Group, one of the world's biggest funds, was supporting the restructuring. It could end up with 10-15 percent in the firm through retaining its old shares and subscribing to the $20-$25 million new issue.
Gulf Keystone, which in its heyday around four years ago was worth $3 billion compared with $60 million now, will need support from shareholders and bondholders to approve the deal. If the deal breaks down, the company will likely become insolvent, the firm said.
(Reporting by Dmitry Zhdannikov and Karolin Schaps)
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