LONDON, Nov 7 (Reuters) - More lenders are selling out of independent oil company Premier Oil’s syndicated loans as the company struggles to complete a key refinancing that will amend loan covenants and extend maturities beyond late 2017, loan traders said.
Bids are due in London’s secondary market on Monday at 4pm on £100m of the term loan and US$120m of the company’s revolving credit facility. Lloyds is the seller, one trader said.
“Some banks are making the decision to jump,” a senior loan trader said.
The auction follows three similar sales in recent weeks at just over 60% of face value by lenders including Siemens, the loan traders said. Bids at this level put the credit in distressed territory.
“There were three trades last week in the low 60s,” the senior loan trader said.
Banks are increasingly wary about lending to the oil sector, which is struggling to cope with the prolonged fall in oil prices.
“Oil prices are what they are and the company is in what could be a complicated restructuring. It’s not difficult to speculate why banks might be selling,” a second loan trader said.
Premier Oil declined to comment.
Premier Oil is negotiating with lenders to amend its loan covenants and extend the maturity of some of its debt beyond 2017 in return for providing security and increasing returns to lenders, while preserving its liquidity.
The company deferred its loan covenants again in November and has deferred covenants on a monthly basis since July.
Premier Oil said that it is aiming to refinance US$3.2bn of drawn debt and US$800m of undrawn loans and that it was making progress with lenders at an investor presentation in September.
Premier expected negotiations to conclude in the third quarter of 2016, however, but discussions are still ongoing in November.
The company continues to have access to undrawn funds from its US$2.5bn revolving credit which is unsecured and is not subject to any periodic reserve base redeterminations that have reduced other oil companies’ access to funds.
Premier said in September that it has net debt of US$2.6bn, which it expected to peak at US$2.9bn and a net debt to EBITDA ratio of 5.2 times at the end of June.
The company’s US$2.5bn loan facility was originally agreed in July 2014 via a group syndicate of 25 banks led by mandated lead arrangers and bookrunners Commonwealth Bank of Australia, Bank of China, Bank of Nova Scotia, Bank of Tokyo-Mitsubishi UFJ, Barclays, Citigroup, DNB, HSBC, ING, Lloyds Banking Group, Nordea and Royal Bank of Canada.
The five-year facility had two one-year extension options. (Additional reporting by Claire Ruckin; Editing by Christopher Mangham)