RE:RE:RE:RE:RE:RE:RE:RE:Design and Strategy of the deal---Debt capitalizationLets Disect the Bloomberg Article:
NewsMexican conglomerate Alfa SAB is back in talks to take over Pacific Exploration & Production Corp. with a
sweetened bid for the beleaguered Colombian oil producer, according to people with knowledge of the matter. Shares of Pacific jumped.
Sweetened Bid - Reflects that this would be one of the best offers among the other 5-6 offers on the table. Which logically means the shareholders will remain intact in one way or the other and there wont be full debt to equity swap wiping all the existing shareholders which we feared about. Good for us!!
A strong offer by Alfa could win support from Pacific’s biggest investor, O’Hara Administration Co., and the producer’s management, the people said, asking not to be identified because the deliberations are private. The offer comes as a surprise after Alfa dropped a bid last month, the people said. Pacific surged 42 percent to 2,825 pesos at 9:49 a.m. in Bogota, reducing its decline this year to 23 percent.
Strong offer to win support of O'Hara - Reflects that the offer has something good for Battencourt to please him. What would please him? He is an investor/major shareholder. Better share price? Strenthening of share price? Infusing more capital? Any of these would be good for all longs here. It will add value to the share price for sure!
Alfa’s proposal includes a loan of about $500 million, as does an existing bid by Pacific management led by co-chairmen Serafino Iacono and Miguel de la Campa, they said. A board meeting to decide on the best offer scheduled for Thursday evening has been canceled.
Loan of about $500M - Reflects how Alfa is eager to counter management's offer which was proposing complete debt/equity swap with current shareholders being wiped out and Capital and ball holders getting all the pie. Shows how badly Alfa wants their offer to stand out!! This provides much needed funds which wouldn't be easily available from anywhere else in the current market situation and provides more time to recoup from the low crude price environment
Alfa, Pacific and O’Hara declined to comment. A decision on the sale and restructuring process of Pacific, which is being led by financial advisory firm Lazard Ltd., could come within the next few days, the people said.
Next few days - NR for the final offer accepted would be issued Wendnesday/Thrusday
Bogota-based Pacific failed to make bond interest payments in January and this week. It has struggled after a series of deals in recent years ballooned debt before oil prices plunged. Alfa already has about a 19 percent stake in Pacific and is its second-largest shareholder. It withdrew a C$6.50-a-share offer to buy the company last year after O’Hara said the deal was undervalued.
O’Hara opposes the chairmen’s restructuring plan and has hired Colombian lawyer Jaime Granados, who also represents former Colombian president Alvaro Uribe, the people said.