MIE Offers to Buy Back Bonds at Discount After Acquisition Plan

MIE Holdings Corp. is making a tender offer to buy back its outstanding dollar-denominated notes at a discount to pare debt while seeking to remove restrictive covenants after announcing plans last week to buy oil assets in Canada.

The Chinese oil explorer offered $600 for every $1,000 of its 6.875 percent February 2018 notes, according to a Hong Kong stock exchange filing Monday. It will separately pay $10 for each $1,000 for consent to remove “substantially all” restrictive covenants and certain default-related events. MIE also offered to repurchase up to $20 million of its 7.5 percent April 2019 notes for as much as $555 per $1,000, including an early-tender incentive.

“Given the substantial discount in the tender, rating agencies may view such a move as a selective default,” said Rick Mattila, international head of market strategy at MUFG Securities Asia in Hong Kong. “While we acknowledge the potential positive of the recent acquisition, we prefer to avoid exposure to the name in general at this stage.”

The discounted buyback came after MIE announced last week a plan to acquire a portfolio of oil-producing assets and processing facilities in Canada for C$722 million ($537 million) from investors including Centrica Plc.

Leon Mei, MIE’s chief financial officer in Hong Kong, wasn’t immediately available to answer calls and he didn’t respond to an email seeking comment Monday.

2018 Notes Surge

The company’s 2018 notes climbed to above bond tender levels. They jumped 5.6 cents on the dollar to 66.3 cents as of 10.19 a.m. in Hong Kong, the biggest increase since November, according to Bloomberg-compiled prices. The 2019 notes were little changed at 56.7 cents. Both securities surged more than 3 cents on June 9. They have an outstanding amount of $200 million and $476 million respectively, according to the offer documents.

Most investors will be inclined to tender because it provides a better outcome for them than to wait for maturity, given Mie’s weak liquidity profile, said Mervyn Teo, a credit analyst at Lucror Analytics in Singapore. Any substantial elimination of the restrictive covenants on the 2018 notes suggests there’s little incentive for anyone to remain as a residual holder, Mattila said.

MIE may have around $52 million cash currently after paying the C$70 million deposit for its acquisition of the Canadian assets, according to a Friday note from Citigroup Inc.

The 2018 offer is expected to close at 4 p.m. London time on June 23, according to its tender offer document. The 2019 offer has an early tender close at 5 p.m. New York time on June 23, and expiry at 5 p.m. New York time on July 10. MIE said both repurchases will be funded by cash in hand and a $147 million third-party loan facility.

MIE has appointed Nomura Holdings Inc. as dealer manager and D. F. King Ltd. as consent and tender agent.

Bloomberg News
June 12, 2017, 02:25:20 GMT

Reporting by Lianting Tu and David Yong; Editing by Neha D'silva, Beth Thomas and Finbarr Flynn