Niko Resources Ltd restructures its debts, sending its shares on a rare rally

Posted by: privatefinancetips in BLOG, Marketing Mar 27, 2016

CALGARY C After a search for buyers failed to show up any meaningful offers, Niko Resources Ltd. has restructured its debts in a move that sent the business’s shares on a rare rally.

Niko’s share price jumped 57 per cent on Monday morning to 44 cents each on the announcement the company had restructured its loan commitments and delayed its payment obligations by 2 yrs.

The uptick comes after years of declines, in which shares of Niko – a one-time analyst favourite and investor darling – collapsed from over $100 this year to six cents as recently as January.

“If they cannot get a deal done in the following two years, then we’re back to where we were,” Maison Placements analyst Josef Schachter said of Niko’s debt restructuring.

The deal still needs a vote, but provides some short-term interest payment relief while also extending the business’s debt maturities.

Schachter said Niko continues to be experiencing 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.

“That’s a lofty target, but that is not going to happen,” he said.

The deficit between Niko’s total assets and its total liabilities was US$2.1 billion after 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 has not found a purchaser.

Part of the issue is that Calgary-based Niko, which doesn’t produce any oil or gas in Canada, is at the mercy from the government of India’s regulated natural gas price.

Niko, along with BP PLC and Mumbai-based Reliance Industries Ltd., is incorporated in the middle of an arbitration process using the Indian government to raise gas prices in the united states, but Schachter said there isn’t any pre-determined end-date for that process.

The company has not been in a position to increase its gas production in India because it is the junior partner in a joint-venture with BP and Reliance, that do not want to produce more gas while the government holds prices low.

Meanwhile, more liquefied gas suppliers are individuals Indian market using their LNG cargoes, which costs more than the price of gas manufactured in the nation.

While Niko has trouble generating sufficient cash from its Indian gas asset, still it has financial obligations in Trinidad and Indonesia.

“They’ve got two years under this deal,” Schacter said. He’s the only real analyst that still follows Niko, despite the fact that he maintains a “hold” rating around the stock, he said he hasn’t published research in it in additional than the usual year.

Every other equity analyst has dropped the organization since it’s share price has languished.

Niko posted a US$27 million net loss in the final quarter, which was actually an improvement on the US$123 million net reduction in the same quarter last year.

Niko did not respond to a request comment.

gmorgan@nationalpost.com

Twitter.com/geoffreymorgan