Toronto-based Frontera Energy has closed a US$100mn revolving letter of credit (LC) facility which will finance oil and gas exploration in South America.
Arranged by Itaú Corpbanca Colombia, Citibank, JP Morgan, HSBC and Bank of America Merrill Lynch, the funds will enable exploration and transportation in Colombia and Peru.
The LCs will be issued by the local branches of the members of the syndicate to Frontera counterparties as required for the operations of business, a Frontera spokesperson tells GTR. Examples of this business include drilling commitments and abandonment provisions.
The new facility replaces the firm’s current secured LC facility, which has US$81.9mn of utilised capacity and matures on June 22, 2018. The updated package has a maturity date of May 17, 2020.
Proskauer Rose and McMillan acted as legal counsel for Frontera, while Clifford Chance acted for the participating banks in the negotiation and execution of the facility.
Frontera’s finances have been somewhat rocky in recent times: 2017 saw a net loss of US$217mn. Formerly operating as Pacific Exploration and Production Corp, the company changed its name to Frontera in June 2017 following a restructure to reduce indebtedness by US$5bn in April 2016. Camilo McAllister, the firm’s CFO, left in March after resigning this February. He was replaced by David Dyck in April.
The spokesperson from Frontera tells GTR: “Following our financial restructuring, our LCs required full cash collateral. This new facility will enable the company to release some of the restricted cash we carry on our balance sheet.”
The facility has an initial term of up to eight months, which will be extended to two years upon satisfaction of certain conditions. “Currently the terms of the LC are similar to the terms of the existing US$250mn exit notes,” the spokesperson explains. “Should those notes get called or refinanced, then the terms of the LC will reflect the terms of new financing.”
Frontera has not made the detailed terms of the exit notes public.
Frontera’s chairman Gabriel de Alba expresses his pleasure at the facility’s “strong support from our banking partners”.
In turn, Richard Herbert, Frontera’s CEO says the transaction is “a model for our agile approach to managing our capital structure, as well as operations”.