Afren warns it will miss interest payment on its debts

Afren, the struggling Africa-focused oil and gas group, warned on Monday it would miss an interest payment on its debts as it continues to hammer out a restructuring agreement with its lenders.

The non-payment of $12.8m on bonds due in 2019 puts the company in formal default, Afren said in a statement, after it failed to meet a 30-day extension granted by its lenders on interest that was due on April 8.

It is the fourth time this year that Afren has missed the payment in an effort to preserve cash as it restructures its balance sheet.

The company said the failure to make the payment would not trigger an "immediate obligation" to repay any of its loans. It added that it had "received assurances" from the "ad hoc committee of existing noteholders", which does not represent all lenders, that it had "no current intentions to take enforcement action".

Afren's shares fell almost 2 per cent to 3.15p in London. They have lost 98 per cent of their value over the past year.

The company, which agreed an interim refinancing with lenders in March, is still in talks with bondholders to finalise a $321m debt restructuring - a debt-for-equity swap that is expected to leave shareholders with just 11 per cent of the company.

Like many of its peers, Afren has been hit hard by the sharp fall in global oil prices. The price of crude has recovered from its lows earlier this year, but with Brent crude at $65 per barrel it is still trading well below its highs of $115 in the middle of last year.

Afren last month appointed Alan Linn, an industry veteran, as chief executive. He replaced Osman Shahenshah, who was sacked last year for gross misconduct over his receipt of secret payments.

Afren has so far reached agreement with lenders representing just above 40 per cent of its debt to provide $200m, in the form of so-called super senior private placement notes.

This interim step is designed to allow it time to reach agreement to issue $321m in high-yield notes that will provide at least $55m in net cash and could raise a further $75m.

The deal is aimed at restructuring net debt of $1.7bn, which includes a $253m tranche repayable in 2016.

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