Bonavista shares-for-debt proposal leaves existing shareholders with 7% stake

Oil and gas producer Bonavista Energy Corp. is proposing a deal with lenders that would eliminate about half of its outstanding debt but leave existing shareholders with only seven per cent of the company.

Shares in the mid-sized Calgary-based company fell by as much as 52 per cent to nine cents on Friday morning following the announcement.

The proposal which requires approval by shareholders and debtholders to be implemented would reduce total debt by about $483 million or 56 per cent and lower annual cash interest payments by $16 million or 43 per cent.

Bonavista would exchange all of its outstanding senior notes for new debt due in 2025 and 2035, and receive a new three-year revolving loan, while issuing new common shares equal to 89.7 per cent of the shares outstanding to senior debtholders.

Its other lenders would get 3.3 per cent of the company in exchange for reducing their outstanding debt by about half.

Bonavista says existing shareholders will have the option to sell their shares to G2S2 Capital, a company controlled by director and 16 per cent shareholder George Armoyan, for five cents each.