Petsec Energy

Situation

Petsec was an independent oil and gas exploration and production company operating in the shallow waters of the central and western Gulf of Mexico. It was the principal operating subsidiary of Petsec Energy Ltd., an Australian public company. Petsec found itself in a liquidity "squeeze". It needed financing to both fund its exploration activities and service $100 million of bond debt at a time when energy market conditions were extremely unfavorable.

Engagement

Gordian Group was engaged to: (i) seek alternative financing, (ii) address Petsec’s leverage issues, and, (iii) assist Petsec in analyzing various business plan options.

Outcome

Notwithstanding the conventional wisdom that Petsec could secure financing only in Chapter 11, Gordian Group was successful in arranging for almost $30 million of interim financing, outside of Chapter 11, that enabled Petsec to maintain its properties and retain franchise value until a transaction could be negotiated with the company’s various constituencies. Gordian Group, together with management and counsel, commenced negotiations with the bondholders. Notwithstanding the highly contentious initial negotiations, a deal was struck within months which contemplated: (i) the sale of Petsec, and, (ii) a highly advantageous allocation of sale proceeds to old equity. In order to bind all the creditors, the transaction was implemented through the Chapter 11 process.