Ethelbert Cooper, the Liberian entrepreneur who founded Afren, believes the future of the struggling African energy group lies in a new strategic partnership bringing in Chinese capital to develop the company’s resources on the continent reports the Financial Times.
Mr Cooper, who rarely speaks to the press, said he had agreed to go on record about his plan to recapitalise the company in partnership with a consortium of Chinese investors “in view of the countless inaccurate stories circulating about the company’s fall from grace” and “to inject some new thinking around a future that the company can embrace”.
The collapse in the oil price, together with a management scandal at the company last year had created “a perfect storm”, he said. Shares in Afren collapsed from a four-year high of 166p in October 2013 to hit a 52-week low of 4.01p in January and the company has struggled to meet its obligations on gross debt worth more than $1bn.
On Wednesday, it defaulted on a $15m interest payment as it pursued a restructuring deal with bondholders that will “substantially dilute” its shareholders’ interests.
People familiar with the company’s options, say that Nigerian oil and gas players, Oando and Lekoil, are also developing their own proposals to inject capital into Afren.
Mr Cooper declined to give details of his own plan to revive the company. But he said it would work in the interests of Afren’s bondholders, existing shareholders and new Chinese investors, whom he declined to name.
“With a different strategy and reinvigorated management there is a chance to pull the phoenix from the ashes. So I am leading an effort to reinvent the company as a new China Africa platform,” said Mr Cooper.
n January, Afren said it needed to raise at least £200m in new equity to repair its battered balance sheet. Three tranches of outstanding high-yield bonds totalling $863m, due to mature in 2016, 2019 and 2020, now trade at discounts of between a half and two-thirds of their nominal value.
Mr Cooper said his plan was to bring in “substantial” new capital, in the form of new equity. This would benefit all parties. Although shareholders would initially be diluted “they would be offered an opportunity to co-invest in a new play they can grow with”, he said. It would be the first Africa-China partnership in the oil and gas sector listed in the UK.
Afren declined to comment on Mr Cooper’s plans and referred to a statement from the board earlier in the week saying that the bondholders were most likely to provide liquidity.
The company started as an idea in Mr Cooper’s head back in 2002 when he spotted an opportunity to ride budding optimism about Africa’s economic future by creating the first major private pan-African oil and gas company.
He brought in the late RilwanuLukman, a respected former Nigerian oil minister and long-time secretary-general of Opec as chairman, and also Egbert Imomoh, former deputy head of Royal Dutch Shell in Nigeria, as a director. “We built it around Lukman’s gravitas in a market that was highly constructive. We had the tide behind us then,” he said.
It should also have raised more money through equity in London when the going was good, he said. Finally, it had proved an error to invest outside the company’s core African interests in Kurdistan.
“At the time when we had very little to sell, no production and few assets to buy it was excellent to raise debt. But when we had production, we should have tapped equity,” said LabiOgunbiyi, a member of Afren’s founding team and former director who is also working alongside Mr Cooper. “With hindsight it is clear the company had too much debt on its books.”
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