Nexus Energy says it will need to go into voluntary administration and take an $18 million writedown on its Longtom gasfield in Bass Strait if an agreement to sell the company to Kerry Stokes’ Seven Group Holdings falls through and a rival bidder does not repay Seven bridging finance.
In a statement released to the stock exchange on Friday night, Nexus said Seven had bought more than two-thirds of the company’s subordinated notes and senior debt, meeting the final condition on a $40m bridge facility designed to keep Nexus afloat until a June shareholder vote on the takeover deal.
Seven’s 2c-per-share takeover offer, which is being recommended by the chairmanless Nexus board, is about one-third the 5.9c at which Nexus stock last traded.
This has sparked shareholder frustration that the board had failed to recapitalise the firm before an April 2 finance deadline that forced it into the Seven deal.
Former Nexus chairman and current Seven chief Don Voelte stepped down in February, citing a conflict of interest that became apparent when Seven sealed a deal with the Nexus board late last month.
Nexus said an investigation of an electrical fault at Longtom, its only cash-producing asset, showed that repairing it would cost between $3m and $6m, cash the company will not have if the Seven takeover does not go ahead. If the Longtom-3 well where the fault occurred was not fixed, loss of revenue and penalties under a gas sales agreement with Santos would result in an $18m net present value adjustment, Nexus said.
Nexus said the Seven bridge facility and senior facility would become repayable if Nexus withdrew from the scheme or if it was voted down. “In these circumstances, absent a superior proposal, the board would need to place Nexus into voluntary administration,” Nexus said.
“For any third party to provide Nexus with a superior proposal, the third party would need to address Nexus’s funding constraints, which, absent agreement with Seven, would involve repayment of the bridge facility, the senior facility and subordinated notes.” As reported in The Weekend Australian, shareholders have called for Nexus stock to be released from a suspension it first went into two months ago because of the Longtom problems.
Nexus said ASX listing rules meant an entity’s financial condition must, in the ASX’s opinion, be adequate to warrant continued quotation of securities.
“In light of the company’s current difficult financial condition and the requirements of ASX listing rule 12.2, the suspension of trading in Nexus’s securities will continue,” Nexus said.
The takeover may provide the chance for Nexus managing director Lucio Della Martina to once again work for Mr Voelte, who was his boss at Woodside Petroleum.