LMS Capital PLC has restructured its investment in Dacian Petroleum as the Romanian oil and gas company continues to report lower than expected revenue and gas production.
The London-based investment company first invested $9.1 million in Dacian through senior loan notes at a 14% annual coupon in 2020. The investment included an equity subscription, giving LMS a 32% stake in Dacian. It was part of a wider total investment made by a consortium including third parties as well as LMS directors Robert Rayne, Jamie Wilson and Nick Friedlos.
As part of the restructuring, LMS will convert its existing senior loan notes into Dacian equity. The original investor group will now own 83% in Dacian while LMS’s interest will grow to 53%.
Rayne and Jamie along with one of Dacian’s founders will also offer the company a $1.0 million unsecured one year bridge loan. The loan has entitlement to an equity subscription of 5% of Dacian shares.
The changes are due to Dacian’s continued revenue decline and stemming from 2023 engineering problems that postponed enhancement projects and lowered gas production levels.
LMS chair Jamie Wilson said: ‘The early period of operations at Dacian has been more challenging than anticipated, but we continue to believe that the company will generate returns for its investors and that the changes agreed will put the company on a sound footing to take advantage of the opportunities open to it.’
As a result of the restructuring, LMS expects its net asset value to decrease by about £1.3 million from its unaudited NAV of £41.5 million at March 31.
The original investor group will also see increased board representation and be able to appoint a majority of the Dacian board.
Until July 12, the board of Dacian consisted of LMS directors Rayne and Friedlos and three Dacian Founders, one of whom has now stepped down as is to be replaced by Wilson.
LMS says the bridge loan will be effective immediately, but the equity swap and the bridge lenders’ subscription as well as any changes to Dacian’s board will need to undergo Romanian regulatory approval.
LMS shares closed untraded at 18.80 pence each in London on Monday.
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