Gulf Keystone debt restructuring

On 14^th July, Gulf Keystone announced the terms of its proposed balance sheet restructuring, marking the culmination of months of discussions with the company's debt holders. The restructuring, if approved by shareholders, will be implemented by way of a debt-for-equity swap and will see existing shareholders significantly diluted.

The company has c.USD600 million of debt, comprising USD335 million of Convertible Bonds and USD266 million of Notes. The restructuring proposes:

• USD335 million of Convertible Bonds: Complete equitisation
• USD266 million of Notes: Refinanced with USD100 million of new notes (the "Reinstated Notes") and through equitisation

Pro forma capital structure

Post transaction, balance sheet debt will be reduced from c.USD600 million to USD100 million. As part of the restructuring, it is envisaged that an USD25 million equity raise be launched as an open offer to the existing shareholders, equating to 10% of the restructured entity if fully subscribed.

Existing shareholders will be significantly diluted and will hold 5% of the company post transaction (pre-open offer) and 14.5% of the company if they fully subscribe to the open offer. Convertible bondholders will represent 20% of the company and the current noteholders will hold 65.5% of the company.

Pro forma ownership

The restructuring is subject to shareholder approval and will be implemented through a UK scheme of arrangement. The board of Gulf Keystone has recommended that shareholders support the transaction, failing which, the company is expected to enter into a formal insolvency and liquidation process.