North Sea explorer Premier Oil’s largest creditor, hedge fund Asia Research and Capital Management (ARCM), has said it will fight the oil company’s plans to extend its debt maturity and pursue several acquisitions.
The fund, which holds more than 15 per cent of Premier’s debt instruments, issued a statement after the FTSE 250 firm said it had agreed a $625m (£473.8m) deal with BP to buy two major North Sea assets.
The firm used the deal to announce a proposed extension of its existing credit facilities to November 2023, giving Premier two and a half years of leeway.
In response, ARCM said that it “will take all steps to oppose the company’s proposal and will vigorously contest any attempt to implement such proposal via a scheme of arrangement.”
The fund added that it was “deeply concerned” about Premier’s new acquisitions, as they “will only serve to increase risk for stakeholders.”
It said management should instead focus “on transactions that facilitate a significant deleveraging of the company’s highly levered balance sheet.”
Premier’s debt has been under scrutiny in recent weeks, after it was reported that a number of its lenders were pushing the company to divest assets.
The firm later tweeted that the reports were “factually incorrect and misleading.”
In today’s announcement, the company said that it had reduced its debt by $330m in 2019, taking it below $2bn, in line with its guidance.
Premier’s chief executive Tony Durrant said that “the cash flow generated from the acquired assets will also accelerate the deleveraging of Premier’s balance sheet.”
The proposed acquisitions are expected to be funded through a $500m equity raise, existing cash and a loan of $300m if needed.
Shareholders will vote on the proposed deal at a general meeting to be held in the first quarter of this year.
Completion of the acquisitions is expected by the end of the third quarter of 2020.
Investors welcomed the news as shares rose 16.3 per cent to 117.8p.