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Premier Oil Faces Legal Fight With Top Lender Over Debt Plan

Antonio Vanuzzo, David Hellier and Laura Hurst

(Bloomberg) -- Premier Oil Plc faces a courtroom showdown with its biggest creditor on Wednesday, a Hong Kong hedge fund that wants to block its plans to extend debt and buy new gas fields.

The oil exploration firm will start a legal process in Edinburgh to extend debt maturities to November 2023 and expand in the North Sea, the court confirmed on Tuesday. The company will need permission from court and approval from 75% of creditors to make the deal binding for all lenders.

But Asia Research & Capital Management, which bought more than 15% of the company’s debt from banks at a discount, and also disclosed a 17% short position on its shares last year, plans to challenge the proposal.

Read more: Premier Oil’s Key Lender Takes 17% Short Position on Shares

ARCM, which was founded by Perry Capital’s former Asia head Alp Ercil, has argued that the company should sell assets to reduce a $2 billion net debt pile first. It also said the move would increase exposure to the gas sector at a time of expected supply surplus.

Premier Oil last week announced a $500 million capital increase to fund the purchase of North Sea gas fields from BP Plc and Dana Petroleum Plc, triggering a 16% share price rally.

Read More: Premier Oil Agrees to Buy U.K. North Sea Assets From BP

ARCM said at the time it “will vigorously contest any attempt to implement such proposal via a scheme of arrangement” in Scotland, where the company has its registered office.

Officials at Premier Oil declined to comment on the court process. A spokeswoman for ARCM declined to add further comment on Tuesday to its earlier statements.

Creditor Support

Premier Oil said last week it has 83% support from its super-senior debt holders and about 73% backing from senior lenders.

Emma Kane, a representative for a group of lenders that supports Premier Oil’s plans said that “the reaction from stakeholders across debt and equity has overwhelmingly endorsed the company’s plan.”

“The sole voice of opposition is from ARCM - a hedge fund with the largest short position in Europe, one that they failed to make appropriate disclosures on until very recently,” Kane said.

ARCM’s spokeswoman declined to comment on the timing of the short position disclosure. The fund started building its short interest in Premier Oil in 2017, according to regulatory disclosures.

“As the regulatory authority responsible for monitoring short selling notifications we are aware of the matter and in line with policy, we do not comment on operational matters,” a spokeswoman for the FCA wrote in an email responding to Bloomberg’s questions over ARCM short position.

--With assistance from Laura Benitez.

To contact the reporters on this story: Antonio Vanuzzo in London at avanuzzo@bloomberg.net;David Hellier in London at dhellier@bloomberg.net;Laura Hurst in London at lhurst3@bloomberg.net

To contact the editors responsible for this story: Luca Casiraghi at lcasiraghi@bloomberg.net, Chris Vellacott

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