Lekoil Nigeria’s parent company rebuffs offer to buy over $110m debt
Lekoil Cayman, the parent company of the Nigerian unit, Lekoil Limited, the oil and gas exploration and production company with a focus on Nigeria and West Africa, has refused the latter’s offer to buy the company’s loan of $110m loan owed by Mayfair Assets & Trust Limited.
Lekoil Nigeria said it had approached Lekoil Cayman, with an offer of “an initial purchase price of US$1.5m, representing 50 percent more than that which the Board of Directors of the Company has agreed to sell the Mayfair Loan to Savannah Energy Investments Limited pursuant to the Option Agreement and “a deferred payment of US$110 million, being more than twice the deferred consideration proposed to be paid by Savannah pursuant to the Option Agreement.”
Lekoil Nigeria Ltd argued that if it successfully acquired the Mayfair Loan, it will not only prevent the loss of OPL 310, it will also have neutral effect on the value of the shareholders’ stocks.
OPL 310 license is due to expire in August 2022 due to inactivity as the company’s internal turmoil has dampaned plans to boost production.
Lekoil Nigeria urged the Board of Directors of the Company to act in the best interest of shareholders by calling off the extraordinary general meeting slated for Thursday, 7 April, 2022 especially because upon the offer to acquire the Mayfair Loan, there would no longer be any commercial reason for Lekoil Cayman to consummate the Option Agreement with Savannah. Lekoil Nigeria believes that any contractual issues arising from the cancellation of the extraordinary general meeting can be managed with limited impact on the company.
Lekoil Nigeria also urged shareholders to vote against the approval of the Option Agreement at the extraordinary general meeting if the offer was refused.
But Lekoil Cayman in a note published April 1, said the offer cannot be accepted without breacing its legally binding obligations to Savannah.
Anthony Hawkins, the Company’s Interim Executive Chairman said,”The offer by Lekoil Nigeria to purchase the OPL 310 loan and the outstanding amount under the Savannah Convertible Facility Agreement is not capable of acceptance as it would put the Company in breach of its legally binding contractual obligations to Savannah.
Hawkins noted that if the offer was capable of acceptance, it is not clear that it would be a superior offer,
According to Hawkins the reasons were that Lekoil Nigeria has not demonstrated the capability to fund the offer; it has not, since 2013, shown any evidence of the ability to fund the appraisal and/or development of OPL 310 (the licence for which is due to expire in August 2022 due to inactivity); and it would be using Group cash to which the shareholders already have an entitlement to; and it has chosen to conduct the negotiation process by way of public announcement rather than private dialogue with the Company.
“For these reasons, the offer should not be seen as a serious attempt to provide an alternative to the Company and its shareholders but as an attempt to muddy the waters prior to the Extraordinary General Meeting.