ADMINISTRATORS for the London Capital & Finance (LCF) business which went under amid controversy have highlighted the potential for holders of bonds it issued to benefit from an increase in the valuation of a North Sea minnow.
The administrators noted the size of the funding pot available for distribution to the holders of £236 million mini-bonds issued by LCF could be influenced significantly by developments at Independent Oil & Gas (IOG).
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The bondholders may benefit from a marked improvement in the fortunes of Independent, which recently won backing for its plans for a big North Sea gas development from a firm owned by US billionaire Warren Buffett.
Independent previously relied on debt provided by a firm that was itself funded by LCF.
The debt provider concerned, London Oil & Gas, went into administration owing money to LCF. It gained a stake in Independent after the firm’s deal with Mr Buffett’s Cal Energy Resources was concluded.The stake could be sold to help pay what is due to LCF.
The joint administrators to LCF told bondholders: “Our advice is that the share price is currently at a significant discount to IOG’s estimated net asset value.”
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The administrators, from accountancy firm Smith & Williamson, said the shareholding would be worth £83m if IOG shares traded at 30p, compared with £106m at 40p.
IOG’s chief executive Andrew Hockey said the statement showed an understanding that the fundamental value of the oil and gas firm was much higher than its current share price suggests.
IOG shares closed at 17.88, giving the firm a market capitalisation of £85m.
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