Pacific E&P works to make bond payments as Feb. deadline looms

By Nelson Bocanegra
BOGOTA, Feb 5 (Reuters) - Colombia's largest private oil
producer Pacific Exploration & Production PRE.TO is working to
avoid default on bond payments as it comes up against a Feb. 10
deadline to complete negotiations with its bondholders.
Analysts said the likelihood of a bond default was growing,
after Pacific used a 30-day grace period to extend January
interest payments of more than $66 million.
Such an extension was agreed to in the bond contracts, but
rating agencies still lowered Pacific ratings to default level.

The Toronto-based company, like other energy producers, has
been functioning in an environment of declining crude prices and
with the refusal of state-owned Ecopetrol to renew its lease on
the Rubiales oilfield.
Investment firm EIG Global Energy Partners, a subsidiary of
Harbour Energy Ltd, has offered to buy all of approximately $4.1
billion in Pacific debt.
Pacific has not responded to the offer, but it said in an
emailed response to queries from Reuters that it reserves the
right to make payments before the period expires.
"We continue to analyze all the scenarios and available
options to improve our structuring of capital, including, as we
have announced, renegotiation with creditors," the company wrote
the email.
On Thursday Pacific extended until February 26 its minimum
liquidity deadline with a group of banks with which it has $1
billion in loans.
Analyst Juan Felipe Pinzon of Profesionales de Bolsa
brokerage said he saw little room for Pacific to fulfill its
obligations this month as low oil prices affected its cash flow.
"I really don't think Pacific has the money to pay even the
first interest payments on its debt within 30 days, nor the debt
that will come due after," Pinzon said. "Its liquidity can't
keep pace."
Stock analyst Luisa Diaz at Acciones y Valores brokerage
said, "The situation is serious because banks won't roll over
the debt, and from there it could enter default."
The company's shares, once the top traded stock on the
Colombian exchange, have lost 97.3 percent of their value since
2011.
Analysts said that Pacific could accept EIG's offer to buy
its debt, and EIG could inject cash into the company, diluting
the power of current shareholders and making Pacific viable for
eventual sale.
Pacific has said there is "no interest in liquidating."
The government's business watchdog stepped up its monitoring
after the delay in bond payments, and is meeting weekly with the
company and asking almost daily for cash flow information.
"These circumstances naturally have led us to have a special
caution," regulatory superintendent Francisco Reyes said in an
interview.
Pacific employs hundreds of oil industry companies that
provide secondary services.