Savers who bought bonds in bust London Capital & Finance may have to wait years for significant returns from the company’s one potentially profitable investment under a deal approved by its administrators today.
LCF lent £38.6 million of its 11,500 bondholders’ money to a North Sea explorer called Independent Oil & Gas. One bidder, RockRose, offered to buy the company or pay LCF investors nearly £40 million to repay the loans but its offers were rejected.
Instead, the administrator today backed a second deal, which sees Independent raise £16.6 million to fund development of one of its wells and give the company more time to repay the loan.
The administrator has also agreed to convert over £1 million of its loan into Independent shares in the hope that the share price will surge if the well proves a success.
The hope is that Independent will succeed in negotiating with a big oil company to fund the next round of investment in getting the gas out of the ground, known in the industry as a “farm-out”.
Usually, farm-outs see small explorers sell up to half of their stake in an oil or gas reserve while the new partner funds the drilling costs.
The hoped-for resulting share price jump could allow LCF to raise more than the £40 million RockRose offered to pay in cash for the debt.
The £16.6 million is raised through the issue of new Independent shares priced at 10p, a deep discount to Friday’s share price of 17p.
Broker Arden Partners described the deal as “good news for IoG”.
