Afren shares drop as it crosses the Rubicon with bond default
TROUBLED oil firm Afren defaulted on its 2016 bonds yesterday, sending shares crashing down by 27.43 per cent.
The company announced its decision not to pay $15m (£9.8m) of interest, which was originally due on 1 February. The firm had already utilised a 30-day grace period.
Afren said yesterday that it had received assurances from its bondholder committee which said it “has no current intention to take enforcement action with respect to the 2016 notes”.
It added that these assurances were made “in the hope and expectation” that the committee and the company would shortly come to an agreement on the terms of a restructuring that would “preserve the group and its business as a going concern”.
The company also said that any new funding agreement with the company’s bondholders and debt providers is likely to “substantially dilute the interests of the company’s current shareholders”.
Analysts at VSA Capital said the default “does not come as a massive surprise” given that credit agencies Fitch and S&P recently downgraded the firm, while Malcolm Graham-Wood at HydroCarbon Capital, said: “Afren has crossed the Rubicon.”