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question about Premier Oil Bonds?

Gilts, bonds, and interest-bearing shares
88V8
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Re: question about Premier Oil Bonds?

#342480

Postby 88V8 » September 24th, 2020, 12:02 pm

formoverfunction wrote:One of the larger bond holders is attempting to auction 7% of the bonds on Friday, half their holding......... it's reported they are looking a for a price of 72%.
Today they've asked BP for a substantial cut on the price of what was considered to be a game-changing purchase.

Asia Research?
Price to sell this morning at the retail level is 71 and decimals.

This could go either way. I wouldn't be surprised if Premier get another price reduction from BP, in addition to the £330mio they already agreed..

I too have sold about half my PMO1 holding, it was somewhat less than 7%.

V8

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Re: question about Premier Oil Bonds?

#342524

Postby everhopeful » September 24th, 2020, 1:49 pm

I sold my entire holding this morning at 75.8 with Barclays. I paid 58.0 for them nearly four years ago and have enjoyed the income as well as the modest capital gain but getting cold feet now.

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Re: question about Premier Oil Bonds?

#342599

Postby formoverfunction » September 24th, 2020, 7:19 pm

88V8 wrote:
formoverfunction wrote:One of the larger bond holders is attempting to auction 7% of the bonds on Friday, half their holding......... it's reported they are looking a for a price of 72%.
Today they've asked BP for a substantial cut on the price of what was considered to be a game-changing purchase.

Asia Research?
Price to sell this morning at the retail level is 71 and decimals.

This could go either way. I wouldn't be surprised if Premier get another price reduction from BP, in addition to the £330mio they already agreed..

I too have sold about half my PMO1 holding, it was somewhat less than 7%.

V8


Asia Research? Yes, it's on Reuters web site if you search on Premier Oil. I also agree, could go either way, just too much uncertainty. They've just got so much going on/against them at the moment.

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Re: question about Premier Oil Bonds?

#345594

Postby Jennifer » October 6th, 2020, 11:27 am

The information Premier Oil has published concerning the repayment of bonds seems unnecessarily vague!

Creditors will receive an average base payment of 61p in the £ but this includes super senior creditors who I assume will receive 100%. They must know the value of super senior creditors so why not state the amount other creditors including the retail bond holders will receive?

We also get the option of additional cash up to an average of 75p in the £ or additional shares. How many shares? The shares are quoted as a percentage but not as a number per $/£ why not?

It seems quite clear from the description that if you opt for the cash alternative you don't get any shares yet the analysis of the structure when all creditors opt for cash has 10% of the shares being held by creditors.

I'm finding it difficult putting a value of the retail bonds when there is no figure for the cash component or the number of shares we will receive!

My best finger in the air guess was that assuming super senior creditors were minimal the cash would be about 60p, sharing the 18% shares equally amongst all creditors comes out at about 2 shares per retail bond so at 16.5p that would be an additional 33p making 93p in total. The current price isn't reflection this though which makes me think I'm probably wrong!

I'd be most interested to hear the view of others here.

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Re: question about Premier Oil Bonds?

#345622

Postby Gan020 » October 6th, 2020, 1:25 pm

Sure is confusing isn't it.

We know that this bond is held mostly by institutional investors rather than PI's so it's reasonable to assume that PMO1 is currently correctly priced.

The RNS says
The offer is 61 cents on the dollar (on average across existing creditors) plus new shares or cash alternative (subject to cap on the cash).
My understanding is this comes to 75 cents on the dollar (on average across existing creditors)

I don't know if PMO1 is subordinated to other debt and I won't be investigating as I don't hold, but it would seem that at 72p to buy in the market holders of PMO1 believe they rank equally with other creditors (the on average across all creditors).

As the major holder of the PMO1 bonds was trying to shift them in the market at 72p (see Bloomberg) that fits too.

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Re: question about Premier Oil Bonds?

#345630

Postby hiriskpaul » October 6th, 2020, 1:54 pm

We are going to have to wait for the publication of the prospectus to get some proper answers, but it would not surprise me to see retail holders (positions less than say 200k nominal) only being offered the cash option. PMO1 is a retail bond so there should be an intelligible offer to retail holders.

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Re: question about Premier Oil Bonds?

#345638

Postby HOOFfool » October 6th, 2020, 2:09 pm

Premier has issued more info, specifically for retail bond holders, at:
https://www.premier-oil.com/investors/retail-bond

This is in addition to the RNS. Again, there is a reference to, "on average", creditors receiving 75p in the pound. I can't get the maths to agree. Much depends on the relative sizes of the super senior creditors and the senior creditors

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Re: question about Premier Oil Bonds?

#345670

Postby Jennifer » October 6th, 2020, 3:45 pm

My latest thinking on this is that the letters of credit are the super senior debt, this would make sense as it appears to be being treated differently to the rest.
They state a gross $2.7bn of debt, if you deduct the $400m of letters of credit that leaves $2.3bn of senior debt including the retail bonds. If you share $1.23bn of cash equally between $2.3bn of debt you get about 53.5p in the £. but $1.63bn shared between $2.7bn is 60.3p in the £.

It's all very confusing and almost intentionally misleading!

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Re: question about Premier Oil Bonds?

#361848

Postby hiriskpaul » December 1st, 2020, 3:57 pm

I am bemused as to the market price of these bonds. I just tried an online sell and was offered 77.5p (plus 175 days interest). But the restructuring RNS implies about 61p + shares, or up to 75p (approx) if I take up the "partial cash alternative" and receive no shares. I would really expect the price to be below 75p due to the delay and execution risk, so can only assume that there is fairly high demand for the shares, at least above what they are being considered to be worth in the partial cash alternative. I am sorely tempted to take the 77.5p and leave any additional profit to those who think they understand what is happening.

Has anyone any thoughts on this? Or is my logic faulty (more faulty than normal)?

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Re: question about Premier Oil Bonds?

#362025

Postby Gan020 » December 2nd, 2020, 9:33 am

hiriskpaul wrote:I am bemused as to the market price of these bonds. I just tried an online sell and was offered 77.5p (plus 175 days interest). But the restructuring RNS implies about 61p + shares, or up to 75p (approx) if I take up the "partial cash alternative" and receive no shares. I would really expect the price to be below 75p due to the delay and execution risk, so can only assume that there is fairly high demand for the shares, at least above what they are being considered to be worth in the partial cash alternative. I am sorely tempted to take the 77.5p and leave any additional profit to those who think they understand what is happening.

Has anyone any thoughts on this? Or is my logic faulty (more faulty than normal)?


Hi,

I don't own these so will leave you investigate but I assume the price is "high" as punters look at the calue of the Chrysoar share alternative and like the look of it. I took a quick look and HL at least don't seem to show prices for Chrysoar so I assume it's unquoted so there's no way to tell. Oil price is up compared with 2 months ago so I guess their share price would be as well.

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Re: question about Premier Oil Bonds?

#362982

Postby HOOFfool » December 4th, 2020, 4:32 pm

I do own the Premier Oil bonds and am also struggling to make sense of the current market price.

The offer for the bonds is broadly 61p and either shares or partial cash (estimated at an average total of 75p - but super senior are expected to be paid at par (per the FAQ) so the retail holders get less than 75p?) . Also the availability of the partial cash offer is limited (a capped $175m is available) so even the (average) 75p might not be bankable.

The current market price for the bonds suggests that the market is valuing the shares alternative. As Chrysaor is unlisted this is difficult. I have been attempting such a valuation using the price of the Premier Oil equity (currently 22p (4/12/20) and up nearly 100% in a month). The merger announcement suggests that the equity of the new entity would be 5% owned by Premier Oil equity holders and 18% owned by the existing creditors (if 100% election for the share alternative). My thinking is that this information, and the market price of Premier equity, should allow a value to be placed on the share alternative to the bond holders (existing creditors). But I'm strugglinmg to make the maths work. There will be other factors (time value of money and execution risk as hiriskpaul states) but I am assuming the current market price of Premier Oil equity is the best proxy for the value of equity in the merged entity.

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Re: question about Premier Oil Bonds?

#366773

Postby HOOFfool » December 16th, 2020, 2:52 pm

Recording where I got to in trying to rationalise the price of the Premier Retail Bonds. Maybe someone sharper than me can take this further.


The market cap of PMO is approx £200m and the PMO equity holders will own 5% of the merged venture.

Assuming the bond holders elect for the shares (rather than the partial cash alternative) the aggregate bond holders will hold 18% of the equity of the merged venture and get, on average, 61% cash on their bonds. The 18% is worth £720m - using the current PMO equity price as the most efficient measure of value of a stake in the merged venture.

The deal announcement refers to $1.23bn being paid to the “Existing Creditors” and an additional amount of “approximately US$400million” which together represent approximately 61c on the dollar (and 1.63/2.7 is 60.37% - where “approximately $2.7bn” is the total gross debt stated in the announcement - if the 2.7 was actually 2.67 (to 2 significant figures) the 61% would fit exactly). So $1.63bn is 61% and, proportionately, £720m should represent $936m (using USD FX at 1.3) and 35%. The 35% and 61% together would make 96% which makes the current 77% market price look cheap.

Problems with the above:
1. The 61% is an average and the super seniors get paid at par so the retail holders probably don’t get 61% cash. I can’t fathom out what the effect of the super seniors being paid at par has on the averaging - the missing info is the volume of super senior debt. The most recent Annual Accounts wasn’t any help and neither is the PDF of the Merger Agreement (which refers to SS as “up to US$718,967,054.20”). For arguments sake using the $718m of the $2.7bn to be repaid at par from the $1.63bn would leave 46c in the dollar for non-super senior. This, together with the 35% would give a better fit with the current 77% market price but does make the announcement statements about 61% "on average" seem pretty misleading.
2. As a check , there is $175m available to retail holders as a partial cash alternative. If this is fully subscribed then the bond holders only hold 10.63% of the equity in the merged entity. So £135m (using USD FX at 1.3) should be about 7.37% (18% - 10.63%) of the equity of the merged venture. This would suggest a much lower price for the PMO equity than current - but perhaps consistent with the PMO price at the date of the announcement (PMO has nearly doubled since the announcement).
3. The various announcements from Premier are all very vague on amounts relevant to bond holders. Amounts are (seemingly arbitrarily) quoted to varying degrees of precision and “approximately” is used liberally - for example the relative ownership of the merged entity is stated to 2 decimals (83.92% Harbour and other Chrysaor shareholders) and to zero decimals if there is no take up of the partial cash. Using 4.5% (technically 5% to 0 decimals) makes a big difference.

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Re: question about Premier Oil Bonds?

#366859

Postby 88V8 » December 16th, 2020, 8:21 pm

As a (very minor) bond holder I have received not a peep of notification about this.

In making calculations, does one assume that all the issue of bonds are still outstanding?

V8

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Re: question about Premier Oil Bonds?

#366930

Postby HOOFfool » December 17th, 2020, 8:58 am

Yes, all bonds are assumed still oustanding. The merger is anticipated at end Q1 2021. The issue is the current price is above what the 1Q cash payment is forecast to be.

If you go looking there is a raft of info on the Premier Oil website, including a subsection for holders of the Retail Bond.

HOOF

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Re: question about Premier Oil Bonds?

#366945

Postby 88V8 » December 17th, 2020, 9:52 am

HOOFfool wrote:If you go looking there is a raft of info on the Premier Oil website, including a subsection for holders of the Retail Bond.

Thankyou.
But my point - and it not a major point as I only have a few - is that surely the Company should be communicating with me?
There have been RNS for Ords holders. Nothing for bondholders.
Is this even legal?

V8

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Re: question about Premier Oil Bonds?

#366953

Postby hiriskpaul » December 17th, 2020, 10:12 am

I sold this morning at 77.25, plus 10 days interest. This is all too hard, but the one thing that did occur to me is that the new company will carry significantly less debt and so less risk. That should lead to a higher premium for the equity than implied simply by the accounting. Maybe some of that premium is being reflected in the price of the bonds.

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Re: question about Premier Oil Bonds?

#367024

Postby SteMiS » December 17th, 2020, 1:21 pm

Sorry I'm late to this thread, I don't realise there was a discussion here.

Here's what I posted on Advfn

"Looking through the prospectus, at the outstanding debt (inc XCCY Hedge counterparties), I make it $2,823.24m. The amount to be paid is $1,230m. That's clearly not 61c in the $. The reason is that debt includes letters of credit which will be 'refinanced'. These amount to $450m (although the prospectus continues to refer to the $400m in the original announcement). That $450m + $1,230 = $1,680 is actually 59.5c in the $ (round to 60c). The 61c in the $ referred to is from the original announcement.

However if the letters of credit are to be refinanced, then the $1,230m must be just payable to the balance i.e. $2,823.24m - $450m = $2,373.24m. That amounts to 51.8c in the $. Yes, the average is 60c in the $ but that doesn't mean the retail bond holders will get 60c; they'll get 51.8c. Actually it's worse than that because some of the creditors and hedge counterparties (I make it $74.94m) are super secured and get paid out in preference. Deduct that and you get 50.3c in the $.

If retail bond holders are entitled to 1.63 pmo shares, then at 20p ish, that's another 32p. Add that to the cash and you get 83p, which isn't far off the current price.
"
---------------------------------------------------------------------------------------------------------------------------
I'm not really interested in shares in Chrysaor (even if I was confident I could value them) so, although I did consider letting my stock run until closer to completion to pick up a bit of interest, in the end I decided it wasn't worth the risk that the market came to the same view as me and sold at 77.2p net (plus a smidgeon of interest).

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Re: question about Premier Oil Bonds?

#367064

Postby HOOFfool » December 17th, 2020, 3:53 pm

Respect to SteMiS for making far greater progress than me in understanding the terms offered to retail holders (although the Prospectus only came out on the 16 Dec - after I'd virtually given up, and it isn't a quick read at 623 pages).

Like hiriskpaul, I've now sold my bonds, also at 77.25.

Wider questions about the opacity of the Premier Oil disclosures remain. In the Prospectus SteMiS has identified further instances where the infomation from Premier Oil is borderline misleading/wrong. On 88V8's point about whether Premier should be communicating with him - I don't know. There is a section of the Premier Oil website for Retail Bond holders and it has a note on the merger - but you almost have to know its there to go looking. Most folk hold shares and bonds in nominee accounts and have to do their own searching for RNSs etc. If a deal is tabled with options then, in my experience, a nominee broker will forward the "Corporate Action" for a decision but only approaching the decision time.

HOOF

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Re: question about Premier Oil Bonds?

#367069

Postby SteMiS » December 17th, 2020, 4:26 pm

Actually for completenes, here's my previous Advfn post on the subject before the prospectus came out

7 Oct '20 - 11:16 - 229 of 259 Edit

No creditors definitely won't be made whole.

The announcement is quite sneakily drafted. It states on average that Existing Creditors will receive 61c on the $ plus further cash or shares (depending on individual election). If an Existing Creditor elects for cash, then on average an Existing Creditor would receive 75c on the $.

Why is that sneaky. Two reasons

1. the use of on average. Total Creditors amount to $2.7b. In that is $400m letters of credit. They will be refinanced (i.e will receive full pay out). The rest will receive $1.23bn cash. $400m + $1.23bn = $1.63bn i.e. 60.3% of $2.7bn (disclosed as 61c on the $ - so some roundings). That's an average. However that means the non letter of credit creditors will receive $1.23bn out of $2.3bn ($2.7bn less $400m LOC) i.e. just 53c on the $.

2. Using the same calculation. If all creditors elect for the additional cash top up and there is a 75c on the $ average payout, it means the total payout on $2.7bn is around $2.025bn. Deducting the LOCs, means other creditors getting $1.625bn out of $2.3bn or 71c on the $. Funnily enough that's where the PMO1 price has ended up.

3. You might also notice another thing there. The difference between the $1.23bn and the $1.625bn is $395m. However the additional cash element is capped at $175m. So even if you elect for cash, you might end up with part cash/part shares. No doubt that's why it's called a 'partial cash alternative'. We don't even know how many shares that would comprise.

-----------------------------------------------------------------------------------------------------------------
In the spirit of openess I should reveal that Tournesol, who some may remember from TMF, and who is clearly no mug, rang investor relations and spoke to someone there who told him, in response to the question of what they deal means for retail bondholders, that

"the deal is 61p/unit plus a second element which is either 14p or alternatively shares in the co which is created by the transaction."

Now I don't discount that I could be wrong in my analysis but I can't see how the numbers stack up on that basis and I'm afraid I fear that the deal is so complex and opaque that IR just don't understand it in detail. I guess we'll see...


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