Afren share price sinks after recapitalisation plan revealed

Afren Plc’s (LON:AFR) shares lost as much as 30 percent to 4.80p by 10:22 GMT today, after the beleaguered company announced a thorough recapitalisation plan, which will secure $300 million in new financing, but will also “significantly dilute” current shareholders’ interest to just 11 percent.

The London-based Africa-focused gas and oil explorer announced that agreement had been reached with the majority of its noteholders and lenders to secure an “interim funding and recapitalisation of the Group”. To ensure a continuation of operations, the company agreed $300m in funding through new debt which will be issued before the end of June 2015. Meanwhile, holders of the 2016 Notes, 2019 Notes and 2020 Notes agreed to swap 25 percent of existing debt to equity, while the rest of the debt repayment is to be extended to 2019 and 2020.
“The Company believes that there are significant benefits in shareholders supporting the Recapitalisation,” Afren said in today’s statement. “If shareholders do not approve the Recapitalisation … [they] would be unlikely to see any return on their current investment.”
The recapitalisation was largely expected, after the company defaulted on a debt payment last week. Still, confidence in the company has continued to dive ahead of its 2014 full-year financial results, due to be released later in March. The company said it expects post-tax impairment charges of $2 billion due to the plunging oil price and a write-off, while revenue is projected at around $0.9 billion.
As of March 10, the consensus among 23 investment analysts polled by the Financial Times has it that the company will “underperform” the market.
As of 11:06 GMT, Friday, 13 March, Afren Plc share price is 6.50p.

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