CALGARY – Lone Pine Resources Inc. (TSX:LPR) failed to make a US$10.1-million, semi-annual interest payment on its senior secured notes Thursday, setting the clock ticking on a possible default the could force the natural gas and light oil developer to seek protection from creditors.
The company, incorporated in Delaware but headquartered in Calgary, said failure by Lone Pine Resources Canada Ltd. to make the payment will result in default on the 10.375 per cent senior notes maturing in 2017 unless remedied within 30 days.
Such a default would allow the trustee or holders of at least 25 per cent of the US$195 million in aggregate principal amount to declare the notes immediately due and payable with accrued interest.
LPR Canada’s failure to make the interest payment on the senior notes could also lead to a cross default under a credit agreement dated March 18, 2011, between Lone Pine, LPR Canada, JPMorgan Chase Bank, N.A., Toronto branch as administrative agent and other agents and lenders.
As of Aug 15, Lone Pine had approximately C$178 million outstanding under the credit agreement.
Lone Pine said in a statement that it was “focused on addressing its liquidity and leverage issues” and for the past several weeks has been in talks with holders of the senior notes regarding a possible restructuring or refinancing of both the notes and indebtedness under the credit agreement.
“Those discussions with the holders are continuing, however, there is no assurance that such discussions will be successful or that an agreement on the terms of a restructuring or refinancing will be obtained before the end of the 30-day indenture cure period,” it said.
Should Lone Pine fail to restructure or refinance by the deadline the company will “likely not have adequate liquidity to fund its operations, meet its obligations . . . and continue as a going concern . . . “
In such an event would likely force Lone Pine to seek relief under the Canada’s Companies’ Creditors Arrangement Act and Chapter 11 or 15 of the U.S. Bankruptcy Code.
Lone Pine is engaged in the exploration and development of natural gas and light oil in Canada, with principal reserves, producing properties and exploration prospects in Alberta, British Columbia, Quebec and the Northwest Territories.
Last November, the company announced it was suing the Government of Canada in a case involving Quebec’s controversial moratorium on hydraulic fracturing or fracking.
Lone Pine says the Quebec government’s move to cancel a natural gas exploration permit for deposits beneath the St. Lawrence River the previous year was “arbitrary, capricious and illegal.”
The company said it was filing the suit under the Chapter 11 dispute settlement provisions of the North American Free Trade Agreement and that it was launched against Ottawa because it is responsible for acts by provinces both under NAFTA and international law.
Stock in Lone Pine, which issued its statement after the close of markets, was up half a cent at 18 cents Thursday on the Toronto Stock Exchange.