Gran Tierra Energy cancels bond exchange 

22-Jun-2022 04:04:00 PM

By Jo Bruni

New York, Jun 22 (IFR) - Gran Tierra Energy, a Canadian oil producer with assets concentrated in Colombia, announced yesterday that it cancelled a recently proposed bond swap.

Analysts said there were various reasons for the decision, including the unwillingness among bondholders to let go of their securities, the results of the Colombian presidential elections and global risk adversity.

"This is very disappointing news for GTE, which was looking to improve its debt maturity profile following an impressive recovery in its operations and financials, including the ability to repay in full its revolving credit facility and reduce leverage," Lorena Reich, senior credit research analyst with independent credit research provider Lucror Analytics, wrote in a research report.

The Calgary-based oil producer had announced on May 24 an offer to exchange US$300m 6.25% senior notes due 2025 and US$300m 7.75% senior notes due 2027 for new 8.75% senior secured amortizing notes due 2029. It offered US$1,000 in new notes for every US$1,000 of old notes to holders tendering by the early June 7 deadline, and after that US$950m until June 2022.

The new notes sought to lure investors with collateral in the form of GTE shares. But some analysts had reservations about the willingness of holders to trade in the 2025s, deemed one of top picks in the LatAm upstream space.

"We particularly like their [2025s] relative short duration and we feel uncomfortable taking the swap and to materially increase average life in a carbon intensive story that it is also vulnerable to scenarios of low Brent prices," Balanz Corporate and Credit Research analysts wrote in a note a few days after the offer to swap was announced.

Pushing debt maturities farther out would expose bondholders to risks of "an aggressive dividend/buyback strategy, intensive exploration activity or M&A moves," Balanz analysts said.

The timing was also unfortunate, analysts agreed.

"The strong risk-off global sentiment combined with leftist Gustavo Petro's recent win at the Colombian presidential elections," Reich said.

Gran Tierra's Colombian properties represent 98% of its proved reserves and 100% of its revenues, but the company also owns certain rights to oil and gas properties in Ecuador.

(Reporting by Jo Bruni)