Armour Energy Group - Case Update

Competing DOCA proposals have been received for Brisbane-based shale gas exploration and production company Armour Energy Group, with each party offering to sweeten the deal at the eleventh hour to ensure theirs is the successful bid.

Jonathan Henry, Damien Pasfield and Mark Holland of McGrath Nicol were appointed joint administrators of the company in November after a period of losses.

Following a sale and recapitalisation process conducted by receivers Richard Tucker and Robert Hutson of KordaMentha, DOCA proposals were received from DGR Global Limited (DGR) and ADZ Energy Pty Ltd (ADZ). The DGR proposal is a recapitalisation transaction with a proposed $54.8 million cash injection. The ADZ proposal is a combined share purchase / asset purchase / DOCA transaction for various Armour Energy Group entities with consideration of $35.6 million, including a $23.6 million credit bid of ADZ’S secured debt.

While on its face the DGR proposal could result in a superior financial outcome for certain creditors, the joint administrators recommended acceptance of the ADZ proposal because, among other things, the DGR transaction would require 6 weeks or more to complete and required funding to sustain the business and assets during that period.

On January 19 (the date of the second meeting of creditors), the joint administrators advised that DGR and ADZ had offered to improve their deals. DGR had offered to accelerate the timetable for completion (but sought an adjournment to the second meeting), to cover the receivers’ and administrators’ costs and the costs of ongoing trading (supported by a draft funding agreement with a number of initial conditions removed) and even offered an alternate proposal. ADZ had transferred the DOCA contribution in trust ahead of a decision on the ADZ transaction, and had increased the facility limit available for its funding of the receivers’ administration costs and offered a performance indemnity to the administrators. The outcome of the second meeting is not yet known.

The joint administrators’ report and the addendum outlining the proposals can be accessed here.