I dunno. The deal doesn't look so hot to me. What's your opinion on the recent bondholders' action?
Matthew Ingram's column in today's Globe & Mail:
Hurricane Isn't Rescued Just Yet
MATHEW INGRAM
Thursday, October 14, 1999
Calgary -- Two weeks after taking the helm
of ailing producer Hurricane
Hydrocarbons, oil patch veteran Bernard
Isautier has managed to hammer out a deal
to merge with the company's partner in
Kazakstan, a local oil refinery -- a merger
many have seen as the Holy Grail for the
Calgary company. But if Mr. Isautier thinks
the hard part of trying to salvage Hurricane
is over, he's in for a surprise. The company's
creditors appear to be planning to fight the
deal tooth and nail, and may even try to force
the company into bankruptcy.
Several representatives of the company's
bondholders took the opportunity during a
conference call on Tuesday to berate Mr.
Isautier for the company's current
restructuring plan, which effectively
proposes that Hurricane be allowed to
continue operating and merge with the
refinery. The merged entity would pay the
arrears on $180-million worth of debt over a
period of time, the plan says, and then
resume the payments on its debts as usual.
Mr. Isautier, a genteel French-born former
civil servant and former CEO of Canadian
Occidental Petroleum, obviously hoped that
the conference call would be an occasion for
rejoicing among the relatively small group of
market watchers who haven't yet written
Hurricane off as a loss. He said the deal
with the Shymkent refinery would allow the
company to return to profitability and
recapture some of its former glory as a stock
market darling.
At least some investors seem to have bought
Mr. Isautier's sales pitch since he joined the
company: Hurricane's shares have climbed
dramatically, after bottoming out at about 27
cents late last month. They traded as high as
$1.85 yesterday, and are up more than 300
per cent since the new restructuring plan
was presented in court on Sept. 27
(Hurricane is currently protected from its
creditors under the Companies' Creditors
Arrangement Act).
The apparent joy of the company's
shareholders, however, is matched by the
vituperation of Hurricane's bondholders, who
were just inches away from taking complete
control of the company last month. A plan
the company drew up, and even announced
in a press release, would have seen the
creditors of the company take over 97 per
cent of Hurricane's common equity in
exchange for their bonds. The plan was
never presented in court, however -- instead,
the company went ahead with its merger
plans with the Shymkent refinery.
In response, a group representing 73 per cent
of Hurricane's bondholders put forward a
petition late last week asking that CCAA
protection be removed so the company could
be forced into bankruptcy. Mr. Isautier said
in the conference call that this was before
the merger deal with the refinery came
together -- but a spokesman for one group of
bondholders said during the
question-and-answer period of the call that
the merger and the associated plan to
resume interest payments had not really
changed anything.
The spokesman rebuked Mr. Isautier for
doing a deal when he said the company
"fundamentally does not have the support of
its creditors." He said Hurricane "had an
agreement and cancelled it two days before
it was to be filed, and replaced it with a plan
that, to be generous, I would call a complete
joke." He and other bondholders asked why,
if the new company's future was so rosy,
Hurricane wasn't prepared to buy back their
bonds.
When one bondholder complained that his
notes were trading for pennies on the dollar,
a clearly irritated Mr. Isautier departed from
the carefully scripted part of the conference
call. "If you want to sell your bonds, I might
be interested personally," he said. "What's
your bid?" the bondholder replied,
half-jokingly. "Give me a call," Mr. Isautier
responded. Later on in the conference call
he repeated this unusual offer, saying to
those "who think their bonds are not worth
very much, I am a buyer, and big."
Mr. Isautier also said he thought the proposal
to give bondholders 97 per cent of the equity
was "childish," and that he had tried to come
up with a solution that pleased everyone --
but that didn't please anyone too much. He
tried to do the same thing with the merger,
he said, in which Hurricane will control a
majority of the merged company's equity
while Kazkommertsbank, the owner of the
Shymkent refinery, will own about 27 per
cent. A proposal made earlier this year and
then later retracted by Hurricane would have
seen the privately held Kazak bank own
about 49 per cent of the merged company.
Mr. Isautier -- who first got involved with
Kazakstan while at Canadian Occidental,
when his company formed a partnership with
Hurricane to develop its oil field -- tried to
put a brave face on his current plan to skate
out from under the Calgary company's debt
problems. But there will be a lot more fancy
footwork required before Hurricane can
make it to the bright future Mr. Isautier
seems so convinced is just down the road.
Business West readers can reach Mathew
Ingram by fax at (403) 244-9809 or by
E-mail at mingram@globeandmail.ca |
