CALGARY — Opti Canada Inc. (TSX:OPC) has filed for a court-supervised restructuring that will transfer ownership of the oilsands developer to creditors who will provide $375 million in new investment funds.
Opti’s current shares will be delisted from the Toronto Stock Exchange and cancelled, the company said Wednesday. Current shareholders would get no money for the shares they’ve held but they will get rights to buy up to 20 per cent of new shares in the restructured company.
The warrants issued to current shareholders will expire seven years after the closing date of the restructuring.
Opti has committed to pay its trade payables to suppliers and employee benefits in the normal course.
Opti has been undergoing a strategic review for well over a year, in the hopes a corporate or asset sale would help it address its debt troubles. It has a 35 per cent stake in the Long Lake oilsands project, which is operated by Nexen Inc. (TSX:NXY), one of Canada’s largest oil and gas producers.
The Calgary-based company appeared Wednesday before the Court of Queen’s Bench of Alberta to begin implementing its proposed restructuring. The plan will require court and creditor approval before it can be implemented.
Creditors holding more than 50 per cent of the company’s debt have agreed to support and vote for the restructuring plan.
One of the plan’s conditions is that Opti refinance certain debt due in 2012 and 2013 before the restructuring closes.
Opti will also have the right to accept a superior proposal in certain conditions, the company said.
“The restructuring and new equity commitment we have negotiated is indicative of the support of Opti’s noteholders, who recognize the long-term value in the company’s asset base,” said Chris Slubicki, Opti’s president and chief executive.
“The recapitalization of our balance sheet will provide us with cash resources to continue to advance operations at Long Lake, as well as to begin development at Kinosis, with our operating partner, Nexen.”
Opti is required to file the plan no later than Aug. 5 and to hold a creditor meeting no later than Sept. 22. It faces a Dec. 1 deadline to implement the plan.
Michael Dunn, an energy analyst at First Energy Capital said the terms of the plan are likely not a surprise to the market, as the company’s debt situation was widely reported.
“If it just maintained status quo, what we have said in the past is that they will be out of money before the end of this year,” he said.
“That’s because of the burdens of the high interest payments they’re making and the operations being cash flow neutral, or still a cash flow drain right now.”
However, if the plan goes through, it will give the company additional capital to fund its share of spending at Long Lake, a project beset by a number of operational glitches.
“If they have this infusion of $375 million worth of cash then that will put them in a much better situation,” he said.
The company’s shares, which last traded at 11.5 cents apiece, were suspended Wednesday on the Toronto Stock Exchange. Its shares have lost more than 90 per cent of their value over the past year.
At Long Lake, companies pump steam deep underground to soften the peanut butter-thick bitumen so it can flow to the surface. The project is unique in that uses the dregs of each barrel of crude as a fuel source.
They have had trouble ramping up production from the steam-driven project due to a number of operational issues.
The glitches have prevented Long Lake from reaching is target production rate of 72,000 barrels per day. In the first quarter, it produced just 25,500 barrels per day.
The project’s operator, Nexen Inc., acknowledged it made some errors in the planning of Long Lake several years ago, which it is looking to rectify.
Nexen’s chief executive has said he sympathizes with Opti’s financial problems, but that it’s ultimately up to that company to do what’s best for its own shareholders.