Ruspetro: Refinances $337.2m USD of Debt to Execute Next Phase of Horizontal Drilling

The Directors of Ruspetro announce the terms of Ruspetro’s proposed Restructuring. The principal components of the Restructuring comprise:

• The refinancing of approximately US$337.2 million of existing debt and the cancellation of the existing Put Option over the Company’s shares for £12.6 million (approximately US$20.2 million). This will be satisfied in part through:
  • the issue of such number of New Ordinary Shares to Mastin Holdings Limited, a company beneficially owned by Sergey Gordeev, the President and a major shareholder of PIK Group, as represents 25.0 per cent. of the Company’s Enlarged Share Capital; and
  • a US$150.0 million five year term New Facility to be provided by “Bank Otkritie Financial Corporation” (Open Joint Stock Company), a leading Russian private financial institution.
• A new Development Facility to be provided by Otkritie for up to US$100.0 million in two equal tranches.
• A new Credit Facility to be provided by Otkritie for up to US$44.7 million.
• The extension of existing Shareholder Loans representing approximately US$96.6 million in aggregate.
• A fully underwritten Open Offer at 10 pence per Share, raising approximately £18.3 million (US$29.3 million) and a Placing at 10 pence per Share, raising up to £15.0 million (US$24.0 million). The minimum guaranteed proceeds of the Open Offer and the Placing will be £25.1 million (approximately US$40.2 million) before expenses.

The implementation of the Restructuring is conditional upon, inter alia, the approval of the Shareholders at a general meeting of the Company, which is expected to be held at 10.00 a.m. on 5 December 2014 at the offices of White & Case LLP, 5 Old Broad Street, London EC2N 1DW. A combined prospectus and circular convening the general meeting is expected to be posted to Shareholders shortly, in which further information regarding the Restructuring can be found.

The Restructuring has the support of a wide range of stakeholders, including a substantial proportion of the Independent Shareholders, and the Company has received sufficient irrevocable undertakings to pass all of the Resolutions to be put before Shareholders at the General Meeting.

Highlights of the Restructuring

The Restructuring will enable the Group to progress the development of its large West Siberia hydrocarbon reserves and resources through the continuation of its multi-stage fractured horizontal well drilling programme.

Following the completion of the Restructuring, it is expected that:

• approximately US$337.2 million of existing debt owed by Ruspetro LLC, a wholly owned subsidiary of the Company, will be refinanced, due in April 2018 under the Existing Facility;
• the Group will owe US$150.0 million of senior debt to Otkritie pursuant to the terms of a US$150.0 million New Facility entered into between INGA (one of the Company’s wholly-owned subsidiaries) and Otkritie and due for repayment in November 2019;
• Mastin will own 25.0 per cent. of the Enlarged Share Capital of the Company;
• the total liabilities of the Group will be reduced by approximately US$173.1 million;
• the Group will have access to a new Development Facility of up to US$100.0 million entered into between INGA, the principal operating subsidiary of the Company incorporated as an open joint stock company in Russia, and Otkritie. This will be available in two tranches of US$50.0 million, the first of which will be drawn down on completion of the Restructuring and the second of which is expected to be available from July 2015, depending on the Group’s ability to meet a production covenant in the first half of 2015;
• the Group will have access to a Credit Facility of up to US$44.7 million entered into between INGA and Otkritie and due for repayment in November 2019, to be used for general working capital purposes;
• the Makayla Shareholder Loan entered into between Ruspetro Holding Limited, a wholly owned subsidiary of the Company, and Makayla, a shareholder of Ruspetro, on 5 August 2010, will have been extended to October 2016;
• the Limolines Shareholder Loan entered into between Ruspetro Holding Limited and Limolines, also a shareholder of Ruspetro, on 23 April 2008, will have been extended to February 2020;
• in addition to the Development Facility and the Credit Facility, the Group will have received, prior to the costs of the Restructuring, estimated to be US$7.5 million, at least £25.1 million (approximately US$40.2 million) in new cash proceeds from (i) a fully underwritten Open Offer to certain qualifying Shareholders to apply for, in aggregate, 183,359,814 Open Offer Shares and (ii) a Placing of up to 150,188,572 Placing Shares in the Company to be subscribed by Limolines, Makayla and Nervent, the Company’s largest current shareholders. In the event that all Shareholders participate in the Open Offer, the Group could receive up to £33.4 million (approximately US$53.4 million) (before expenses) under the Placing and Open Offer;
• the Group will have no outstanding Put Option obligations;
• the Company’s obligations to repay the Further Limolines Loan (in respect of the principal amount and interest totalling US$10.7 million) in February 2015 will be off-set against Limolines’ obligations to subscribe for New Ordinary Shares in the Placing and Open Offer; and
• US$5.0 million in respect of accrued interest under the Makayla Shareholder Loan will be repaid in May 2015.

These summary highlights should be read in conjunction with the further details of the Restructuring, which are set out below.

John Conlin, Chief Executive Officer of Ruspetro plc, commented:

“This landmark transaction gives Ruspetro the necessary capital to execute the next phase of its horizontal drilling programme and to continue the application of innovative technology to unlock value from our assets. We look forward to strong and productive relationships with our new lender and shareholder and welcome them as partners in the business.”