Each one in plain English, with the numbers worked through for a shareholder.
26 Aug 2003bankruptcy or receivership● NeutralMajor
The bankruptcy court confirmed the Second Amended Plan of Reorganization on August 4, 2003, and it took effect August 14, 2003. Secured lenders have an allowed claim of $45 million in principal plus interest and fees, and received an $8.75 million initial payment; other cash flows to secured and unsecured creditors from expense savings, holdback proceeds from earlier asset sales and contingent assets. Existing shareholders (Class 4) keep their interests in the reorganized company, with 37,934,855 shares outstanding and none reserved for new issuance. Ben B. Floyd, formerly the trustee, is now sole officer and chairman of a board that includes creditor-designated directors. Equity survives, but the plan pays creditors first from the cash sources listed, and the filing says remaining cash after claims are paid in full vests in the reorganized company.
This amends the earlier May 2003 report and repeats its content: Deloitte & Touche's resignation effective May 16, 2003, the Chapter 11 status, and the Deep Dindal extension request. New detail is that Deloitte began serving July 19, 2002, issued no audit report for either of the past two fiscal years, and had no disagreements with the company. The text refers once to the 'February 2003' report while the section is headed March, which looks like a leftover typo (inference).
Deloitte & Touche resigned as auditor on May 16, 2003, leaving the company without an independent accountant while it plans a search for a replacement. The filing also says the bankruptcy covers only the Cayman parent, that its three Colombian subsidiaries hold the only material assets and are 'in good financial standing' (the company's own statement), and that a March 17, 2003 court order bars the trustee from spending on preparing 10-Ks, including the one missed on March 31, 2003. The exploration period on the Deep Dindal contract expired April 24, 2003, and the company has asked Ecopetrol for an extension to seek financing for the Escuela 2 well; it expects one but says this is uncertain. Attached is the March 2003 bankruptcy monthly report.
Seven Seas consented on January 13, 2003 to being treated as a Chapter 11 debtor-in-possession in Houston, responding to an involuntary Chapter 7 petition filed on December 20, 2002 by a group of senior unsecured noteholders. On January 14, 2003 the court adjudicated it under Chapter 11 and appointed Ben B. Floyd as Chapter 11 trustee. The filing does not say what happens to shareholders' interests.
The company said it now expects a material downward revision to its published net proved reserves of 47.6 million barrels of oil (as of December 31, 2001) at the Guaduas Oil Field, as part of a reassessment announced July 1, 2002. Oil production has averaged about 6,700 barrels a day gross (3,100 net to Seven Seas) month-to-date, and rates did not rise as expected after gas injection began in late May 2002. The company gave no estimate of the size of the cut; revised reserves, their value and cash flow estimates are expected by the end of August.
The board stopped using Arthur Andersen LLP as auditor and chose Deloitte & Touche LLP going forward, replacing the firm shareholders were asked to ratify in the 2001 meeting. The filing says Andersen's reports for the past two years had no adverse opinion, but the report for the year ended December 31, 2000 carried a going-concern modification. It reports no disagreements with Andersen.
The board adopted a shareholder rights plan (a 'poison pill') and declared a dividend of one purchase right per common share held on March 27, 2002. The rights become exercisable if a person or group acquires 15% or more of the stock or launches a tender offer that would do so, letting other holders buy shares at half the market price. The filing says it is not a response to any takeover effort and the company is not aware of one. The board can redeem the rights for $0.01 each before the 15% threshold is crossed, and the rights expire after ten years.
Seven Seas filed a registration statement to move the company's legal home from the Yukon Territory (Canada) to the Cayman Islands, with a shareholder vote set for February 28, 2001; it needs two-thirds of the shares voted. The filing says each shareholder's number of shares and percentage ownership will not change, and it registers up to 37,836,420 ordinary shares. The stated reasons are that most shareholders are not Canadian residents, revenues come from Colombia, and the Cayman Islands has no corporate income tax. The same meeting also covers re-election of seven directors and ratifying Arthur Andersen LLP as 2000 accountants.
