The biggest borrower of collapsed mini bond provider London Capital & Finance will see its main creditor repay £22.4m worth of its debt.
AIM-listed gas development and production company Independent Oil & Gas has announced its plan to restructure its debt that it is set to repay London Oil & Gas.
As its primary borrower, London Oil & Gas owed LC&F a total £122m, according to a March report from administrators Smith & Williamson.
The administrators said that London Oil & Gas has on-lent the majority of funds, directly and indirectly, to other companies.
London Oil & Gas’s biggest sub-borrower, Independent Oil & Gas, owed it £38.6m.
London Oil & Gas entered into administration in March with less than £1,000 in its accounts.
Administrators deemed the action would “help to facilitate safeguarding the value and security of the assets of London Oil & Gas for the benefit of all its creditors, including Independent Oil & Gas.
The administrators confirm these creditors include the LC&F bondholders.
On Monday, Independent Oil & Gas published its plan on how it would structure two loans taken out from London Oil & Gas in February 2016 and February 2018.
The first mentioned loan worth £11.4m will be converted into loan notes, which are then expected to be converted into 61 million shares.
The loan from 2016 of £9.4m would be turned into 117 million shares, with another £1.4m turned into loan notes which are then expected to be convertible into 17.7 million shares.
Sales of shares held by London Oil & Gas will be under market restrictions for 12 months.
Independent Oil & Gas chief executive Andrew Hockey says: “This conversion and restructuring of the London Oil & Gas facilities is an important step in the process of completing our announced farm-out transaction and reaching final investment decision.
“These steps simplify and clarify our capital structure and London Oil & Gas’s relinquishment of security will enable us to undertake our intended bond issue. Upon completion, the bond is intended to be the company’s sole long-term secured debt.”
In March, LC&F administrators said they “remained confident that they will achieve full repayment of London Oil & Gas’s loans, including interest.”
They said they would work with Independent Oil & Gas administrators with the intention of maximising the financial outcome for the LC&F bondholders.
Smith & Williamson partner and joint administrator of LC&F Henry Shinners says: “The predicted benefits to come from the realisation of London Oil & Gas’s interests in Independent Oil & Gas will, after any tax payable and the costs of realisation, enable the joint administrators to be funded for their ongoing investigations, which are directed at recovering substantial further assets for the LC&F bondholders, and will also partially fund future dividends to the LC&F bondholders.
“The expected realisations from Independent Oil & Gas are already factored into the joint administrators’ estimated minimum dividend to the LCF bondholders of circa 25 per cent.
“This is because the joint administrators and their legal team and advisers have been working on this matter since their appointment.
“This estimated minimum return to the LC&F bondholders excludes any potential compensation to which LC&F bondholders may be entitled to from any other source, including from the Financial Services Compensation Scheme.”