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Lightstream proposal to pay nearly $1.2B in debt with stock gets court OK

Last Updated Jul 13, 2016 at 3:15 pm MDT

CALGARY – Lightstream Resources said Wednesday it’s been granted preliminary court protection from creditors as it pursues a plan to reduce its debt by $1.175 billion — a move that would see secured creditors receive 95 per cent of the struggling oil and gas company’s equity.

Current shareholders would end up with 2.25 per cent of the equity in a revitalized Lightstream, which has been unable to keep up with its interest payments due to the collapse in oil prices that began in late 2014. Unsecured noteholders would get 2.75 per cent.

The company said Wednesday the Alberta Court of Queen’s Bench had granted a preliminary interim order prohibiting holders of its secured and unsecured notes from declaring it in default or taking other enforcement steps.

It said it will return to court in August to seek permission to hold votes with shareholders and secured and unsecured creditors, all of whom must support the restructuring proposal for it to proceed.

CEO John Wright said the proposed recapitalization was Lightstream’s only option to survive after it failed to find a suitable buyer for its prized Bakken Saskatchewan light oil assets or line up alternative financial backers. The Bakken assets have been on the block since 2014.

“The end result, post a positive vote from all of the security holders, will be the company survives, it’s very well capitalized with really solid cash flow and a lot of growth opportunities that we can get at right away because we actually eliminate the huge majority of interest payments we made,” Wright said in an interview.

“The beauty of this is that everyone comes out as a shareholder.”

He added company employees and board members own less than 10 per cent of the shares.

Calgary-based Lightstream (TSX:LTS) expects the plan to reduce its annual interest payments by about $112 million.

The company had previously warned that it wouldn’t be able to make a $41.7-million interest payment on June 15, starting the clock on a 30-day grace period that ends Friday.

Lightstream was built through a series of acquisitions starting in 2009. It boasts a strong base of light oil production in Alberta and Saskatchewan but its debt totalled $1.6 billion at the end of 2015.

Lightstream’s annual average production in 2015 fell 22 per cent to 31,392 barrels of oil equivalent a day due to asset sales and lower investment in new wells. It reported a net loss of $946 million, including a non-cash writedown of $661 million to account for lower anticipated future commodity prices.

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Note to readers: This is a corrected story. An earlier version omitted the title and first name of John Wright, Lightstream’s president and CEO.