CALGARY C After a search for buyers didn’t show up any meaningful offers, Niko Resources Ltd. has restructured its debts in a move that sent the company’s shares on a rare rally.
Niko’s stock price jumped 57 per cent on Monday morning to 44 cents each on the announcement that the company had restructured its loan commitments and delayed its payment obligations by 2 yrs.
The uptick uses many years of declines, in which shares of Niko – a one-time analyst favourite and investor darling – collapsed from over $100 this year to 6 cents even as January.
“If they can’t obtain a deal completed in the next two years, then we’re back to where i was,” Maison Placements analyst Josef Schachter said of Niko’s debt restructuring.
The deal still requires a vote, but would provide some short-term interest payment relief whilst extending the company’s debt maturities.
Schachter said Niko continues to be struggling with a high debt load, and is still looking to sell itself, as long as it may obtain a price that covers the business’s debts.
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“That’s a lofty target, but that is not going to take place,” he said.
The deficit between Niko’s total assets and its total liabilities was US$2.1 billion at the end of December 2015.
Niko hired New York-based investment bank Jefferies LLC to consider “strategic alternatives” including its “outright sale” in December 2014, but the company hasn’t found a buyer.
Part from the issue is that Calgary-based Niko, which does not produce any oil or gas in Canada, reaches the mercy of the government of India’s regulated gas price.
Niko, together with BP PLC and Mumbai-based Reliance Industries Ltd., is in the middle of the arbitration process with the Indian government to raise gas prices in the country, but Schachter said there isn’t any pre-determined end-date for that process.
The company is not able to increase its gas production in India since it is the junior partner in a joint-venture with BP and Reliance, which do not wish to produce more gas as the government holds prices low.
Meanwhile, more liquefied gas suppliers are targeting the Indian market with their LNG cargoes, which costs more than the cost of gas produced in the country.
While Niko has trouble generating sufficient cash from the Indian gas asset, still it has obligations in Trinidad and Indonesia.
“They’ve got 2 yrs under this deal,” Schacter said. He is the only analyst that still follows Niko, despite the fact that he keeps a “hold” rating around the stock, he explained he hasn’t published research in it in more than the usual year.
Every other equity analyst has dropped the company as its share price has languished.
Niko posted a US$27 million net loss in the last quarter, which was actually a noticable difference on the US$123 million net loss in exactly the same quarter a year earlier.
Niko did not react to a request for comment.
gmorgan@nationalpost.com
Twitter.com/geoffreymorgan
