Global commodities dealer Trafigura is set to acquire a 6% ownership stake in London-listed oil and gas firm, President Energy. The London Stock Exchange trading company primarily holds assets in Argentina but is headquartered in the UK. Trafigura closed the deal with the youthful commodities company as part of a plan to reduce President Energy’s debts.
Details of the undertaking show Trafigura would part with $4 million in exchange for new shares in the company priced at $4 per share. The deal will enable President to reduce advancements made to it by Trafigura last year significantly.
Last year Trafigura loaned President Energy an undisclosed amount of money on top of an arrangement to purchase some of its Argentina-focused assets.
According to a report released by President on Monday, Trafigura has an option to take additional shares for $3.65p.
The announcement further publicised a deal saying President had swapped debt for equity with a company that is owned by its Chair Mr Peter Levine, who is also its largest shareholder. Tellingly, Mr Levine’s shareholding will rise to 29.99%.
IYA, which is owned by Levine, is set to convert to equity an unsecured loan to President amounting to $1.95 million. The loan will be converted at $4.04 per share.
Mr Levine’s firm has promised to convert an additional $2.875 million debt into equity for $4.65 per share if Trafigura goes ahead with its plan to subscribe to further shares of President.
The London-listed energy firm confirmed that indeed the two transactions were set to take place but would require approval from shareholders during this year’s February meeting. If approved, the two deals would reduce President’s debt burden by about $5.95 million or to a maximum of $14.8 million.
IYA CEO Mr Levine yesterday said that Trafigura was an “important off-taker of the group”.
“We welcome Trafigura as a significant stakeholder in President.”
“The practical effect of both the subscriptions and conversions announced today would immediately reduce debt by a minimum of nearly $6m and potentially almost $15m, which will benefit both the balance sheet and profit-and-loss account. “The group on present projections will be free of all of its existing third-party financial debt within the next 18 months,” Levine added.