OZ Minerals is likely to fail in its attempts to refinance US$560 million of debt by the set date of December 29 2008, the company announced in a recent statement.
OZ has been negotiating to refinance the debts for several weeks and was confident of success, but a prospective new lender’s decision to not participate in the refinancing has proved a significant setback.
“While OZ Minerals will continue to work towards completing the refinancing negotiations as soon as possible, the Company advises that completion by 29 December is now highly unlikely,” the company said.
The option to extend refinancing until January 31, 2009 is still available to the company, but that option is dependent on satisfying certain conditions that may be difficult to meet, the company said.
“Although OZ Minerals continues to use its best endeavours to satisfy those conditions the risk of the Company not being able to satisfy the conditions has increased,” the company said.
OZ Minerals is hopeful that these required conditions can be altered.
“The Company is in continuing dialogue with the existing banks about the possibility of these conditions being varied and/or the timeframe being extended, and believes there is a reasonable prospect of achieving such an outcome,” the company said.
“OZ Minerals’ cash position has deteriorated since its last announcement.
“As of 8 December 2008, OZ Minerals had cash on hand of $279.4 million (US$178.8 million), which is down from the $405.0 million (US$259.2 million) as at 30 November 2008, which was reported by the Company in its 4 December 2008 announcement.”
These reversals are due to a reduced cash flow from lower commodities prices and the company’s decision to defer projects, which has resulted in redundancies and closure costs.
According to the company, any danger that the debts are not able to be paid could potentially have flow on effects.
“There are provisions in the Company’s facilities under which a default in one facility may trigger default of the Company’s other facilities and the Company’s Convertible Bonds,” the company said.