AIMCo calls in $111M in loans made to Savanna

Alberta pension fund backed rival bid for firm

CALGARY • The Alberta Investment Management Corp. is demanding a local drilling company immediately repay $111 million in loans and fees, which is pressuring the company to refinance its debt while in the middle of a takeover.

AIMCo demanded from repayment

this week following a tumultuous four-month period in which Savanna tried but failed to fight off a hostile takeover from another Calgary-based oilfield company,

AIMCo, which manages $90-billion worth of public pension investments for the Alberta government, loaned Savanna $200 million at the beginning of that fourmonth period but supported a competing, negotiated bid from Western Energy Services Corp. that was not successful.

When Total did successfully take control of Savanna last month in a deal worth $444 million, Savanna acknowledged the change of control resulted in the drilling company being in default with some of its credit facilities, but said it didn’t expect its lenders to act on the default.

But AIMCo did act and served Savanna with a default notice Tuesday, demanding repayment of $105 million in loans plus interest and a $6-million fee payable in the event of a change in control of Savanna’s shares.

The Crown corporation declined a request for comment while Savanna issued a release that said it is considering its refinancing options.

While the request for repayment was immediate, the terms of the loan give Savanna and its majority shareholder Total, 180 days before AIMCo can enforce collection.

AltaCorp Capital analyst Aaron MacNeil said the repayment demand was widely expected because AIMCo supported Western’s deal over Total’s deal.

“They have enough time,” MacNeil said of the 180-day period, which will allow Total to refinance Savanna’s debt and completely merge Savanna into its corporate structure. “I wouldn’t expect they’ll have any issues,” MacNeil said, adding that Total has an “excellent” balance sheet.

Total had only $45 million in debt prior to the Savanna acquisition, compared with Savanna’s $218 million of debt, most of which was owned by AIMCo. Neither Savanna nor Total responded to a request for comment.

Savanna could also be subject to a demand for payment from Western Energy Services because Savanna management agreed to a $20-million break fee when negotiating the deal with Western to thwart Total’s bid.

Total president and CEO Dan Halyk told the Financial Post last month that he did not believe Savanna needed to pay the break fee to Western based on his understanding of the contract between the two companies. He instructed Savanna “to take no actions that would result in that break fee becoming payable.”

Halyk has since become a director of Savanna.