Chi­nese in­vestors buy debt-stressed en­ergy com­pany

China Daily (Canada) - - FRONT PAGE - By HENG WEILI

An undis­closed group of Chi­nese in­vestors will buy all of the oil and gas as­sets of the debt-sad­dled Long Run Ex­plo­ration Ltd, based in Calgary, Alberta.

The com­pany said on Mon­day that the in­vestors had agreed to pay a 215 per cent pre­mium, or 52 cents, to Long Run’s share price of 16 cents. The ag­gre­gate value of the trans­ac­tion, in­clud­ing the as­sump­tion of Long Run’s cur­rent net debt and trans­ac­tion costs, is ap­prox­i­mately $770 mil­lion, the com­pany said.

The stock more than dou­bled to 36 cents Mon­day on the Toronto Stock Ex­change. Shares inched up to 37 cents on Wed­nes­day.

Long Run said in a state­ment that “com­mod­ity prices and eq­uity mar­kets have con­tin­ued to de­te­ri­o­rate. Long Run has re­mained fo­cused on im­prov­ing its bal­ance sheet de­spite chal­leng­ing mar­ket con­di­tions while en­sur­ing max­i­mum op­tion­al­ity ex­ists to cre­ate value for all stake­hold­ers.”

The Chi­nese in­vestors have ex­ten­sive ex­pe­ri­ence in op­er­at­ing and in­vest­ing in the oil and gas sec­tor and had “re­cently un­der­taken and com­pleted sig­nif­i­cant controlling in­vest­ments into the up­stream oil and gas sec­tor in Canada,” the com­pany said in a state­ment.

Bill An­drew, Long Run chair­man and CEO, said on Mon­day that the buy­ers want their iden­tity with­held for now but they will be iden­ti­fied at a later date, the Calgary Her­ald re­ported. He said the Chi­nese in­vestors al­ready have large oil and gas in­vest­ments in Canada and that al­though they re­fer to them­selves as a group, they op­er­ate as a cor­po­ra­tion.

An­drew said that Long Run’s 200 employees will keep their jobs in a pri­vate com­pany that will have a sim­i­lar busi­ness model: ac­quire, de­velop and grow oil and gas as­sets, the Her­ald re­ported.

The in­vestors also are offering $750 per $1,000 prin­ci­pal amount to buy out Long Run’s hold­ers of 6.4 per cent con­vert­ible un­se­cured sub­or­di­nated deben­tures due on Jan 31, 2019.

On Mon­day, Long Run said it had agreed with Maple Marathon In­vest­ments Ltd of Hong Kong and MIE Hold­ings Corp to can­cel an agree­ment with­out penalty in which it would have sur­ren­dered 39 per­cent of its eq­uity in ex­change for $100 mil­lion to pay down debt.

“I wish in­vestors got out of it what they put into it … but mar­ket con­di­tions are hor­ri­ble, and we got caught on the wrong side of some ac­qui­si­tions,” An­drew told the Her­ald. “From where they were sit­ting on Fri­day, when the stock was 16 or 17 cents per share, this of­fer is for 52; it’s a 200 per­cent lift. Short-term in­vestors will be very happy; longert­erm in­vestors ...”

An­drew said the deal is ex­pected to close in April, pend­ing ap­proval by stake­hold­ers and reg­u­la­tors.

Long Run is the lat­est in a line of ac­qui­si­tions by Chi­nese com­pa­nies of Cana­dian en­ergy firms.

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