LONDON: Nostrum Oil & Gas PLC said Monday it has agreed to sell its Kazakhstan operations to Altaris Holding Ltd. for $304.6 million, a transaction that will allow the struggling energy company to repay its secured notes in full and partially repay unsecured notes.
The sale, announced Aug. 17, involves the indirect subsidiary Nostrum Oil & Gas Finance B.V. selling its participating interests in Zhaikmunai LLP and POSITIV Invest LLP, along with rights under related loan agreements. The buyer is owned by Fincraft Energy Holding Limited and Alturion Holding Limited.
The purchase price is subject to adjustments related to net working capital, net debt and cash positions of the target entities at completion.
The company’s unrestricted cash balance remains mostly outside the sale, and no material liabilities are expected to remain between the entities being sold and the rest of the group upon completion, Nostrum said.
If the sale is completed, the group expects to repay all outstanding amounts on its senior secured notes in full and partially repay its senior unsecured notes. The company noted that the notes matured June 30 and the group was unable to repay the amounts due at that time.
“The overall transaction described in this announcement will result in the best outcome for the group and its stakeholders,” the board said in a statement.
The company expects to begin an orderly wind-down process after the sale closes, subject to required note holder approvals, wind-down costs and other contingencies.
Conditions and escrow arrangements
The sale is subject to several conditions precedent, including merger control clearance under Kazakhstan law, consents from Kazakhstan’s Ministry of Energy and Qazaq Gaz, shareholder and pre-emption processes related to POSITIV, senior unsecured note holder approvals and confirmed financing for the buyer.
Conditions must be satisfied by Sept. 15, with a possible automatic two-month extension if conditions are unmet or unwaived by that date.
The company cautioned there is no certainty all conditions will be satisfied or waived, nor that the sale will complete.
Shareholder approval is not required for the sale.
A total of $10 million of the sale consideration will be held in escrow for at least six months to cover potential claims under the sale agreement.
Stakeholder recovery
Based on the purchase price, the company’s capital structure and cash position, and current expectations of transaction costs and the wind-down outcome, the sale would enable full repayment of senior secured notes and partial repayment of senior unsecured notes.
The group said it targets an initial repayment to senior unsecured note holders of approximately $150 million, providing no assurance of that amount. Further, materially smaller repayments of outstanding principal could follow over time, depending on adjustments, claims, wind-down costs and contingent assets and liabilities.
The company expects to soon launch a consent solicitation seeking approvals from eligible senior unsecured note holders to release guarantees and security and to approve a mechanism for a solvent wind-down of the group after the liability period under the sale agreement expires.
The group does not currently expect material residual proceeds for ordinary shareholders, if any, but did not rule out a final distribution at the end of the wind-down process depending on final proceeds, creditor recoveries, costs, retained liabilities and other contingencies.
Ad hoc forum support
The group said it has been in discussions with an ad hoc group of beneficial owners representing more than 50% of the senior unsecured notes, which has expressed support for the sale and subsequent orderly wind-down. Formal approval will be sought through the consent solicitation process, and there is no assurance such approval will be obtained.
Nostrum Oil & Gas PLC is an independent energy company with gas processing infrastructure and an export hub in northwest Kazakhstan. Its shares trade on the London Stock Exchange under the symbol NOG. The company’s principal producing asset is the Chinarevskoye field, operated by wholly-owned subsidiary Zhaikmunai LLP. The company also holds an 80% interest in Positiv Invest LLP, which holds subsoil use rights for the Stepnoy Leopard fields.
