Afren plc said it may delay a $15 million coupon payment to bondholders next week as the slump in oil prices sours $4.5 billion of debt owed by European drillers and explorers.
The company’s $253 million of 11.5 percent bonds due 2016, which have a coupon due February 1, slumped 10 cents to 39 cents on the dollar, according to data compiled by Bloomberg.
Fitch Ratings downgraded the London-based company, which explores and drills in Nigeria and Iraq, two steps Wednesday, saying that “default is imminent.”
With crude prices plummeting more than 50 percent over the past six months, bonds sold by European oil operators are showing signs of distress.
Read also: European government bonds rally on gloomier outlook
More than $4.5 billion of the securities are now trading at less than 70 percent of face value as investors anticipate slumping profit and asset writedowns.
“New funds will be required to meet interest and principal repayments, working capital and a reduced capital expenditure programme,” Afren said in a statement. “The company will be having discussions with its existing stakeholders and new third-party investors regarding recapitalising the company.”
Afren said it was in talks about a possible tie-up with Seplat Petroleum Development Company plc. The Lagos-based company has until January 30 to submit a bid, according to the statement.
“The industry is at one of the most stressed points in its history,” said Alex Gheorghe, an analyst at RS Platou Markets in Oslo. “We expect a number of debt restructurings and liquidations as lower prices feed through to company results.”
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