Refinancing Update
23 November 2009 - 5:15PM
UK Regulatory
TIDMSOGP
RNS Number : 9470C
Sovereign Oilfield Group plc
23 November 2009
SOVEREIGN OILFIELD GROUP Plc
("Sovereign" or "the Company" or "the Group")
Update on re-financing activities
The Board of Sovereign announces that it is in new discussions with its lending
consortium ("the Consortium") regarding the terms of its existing loans.
In May 2009 the Company concluded an agreement with the Consortium, which
resulted in a standstill on all outstanding defaults and debt repayment until 31
May 2010, a reduction in the cost of finance through lower interest rate margins
and a revised covenant package. The Board considered that these measures
alleviated the Group's short to medium term funding concerns.
During the last fifteen months, the Group has disposed of a number of its
subsidiaries, in line with its strategy to refocus the Group as a fabrication
business. Sovereign has disposed of Diamant Drilling Services SA, Vertec
Engineering Limited and the cabin rental business of Labtech, Prodrill
Engineering Limited, four properties, and some of the assets of SFRS.
During that period GBP13 million was realised from these disposals which has
been used to reduce the Group's debt facilities with the Consortium.
The Group continues to implement cost reduction strategies and the disposals of
the drilling businesses and the Directors continue to focus on the core areas
with the greatest opportunities for growth.
Despite continuing difficult market conditions, the fabrication division has
maintained revenues and continues to trade profitability and generate positive
cashflow. However a number of the fabrication division's customers have delayed
payment due to their own working capital constraints, and this in turn has led
to a reduction in the short term working capital facilities supporting the
Group.
The Group's drilling division, consisting of Serco SA, Maxwell Downhole
Technology Limited and RDT Precision Engineers Limited (which is being closed)
has remained loss making in the current financial year.
As a result of the drilling division's losses and delays in a number of customer
payments to the fabrication division the Group has not achieved its 2nd quarter
covenant and has therefore had to re-open financing discussions with its lending
consortium. The Board is confident of a successful resolution and will update
shareholders in due course.
Further information:
Sovereign Oilfield Group Plc Tel: 01224 261900
Graham Burgess, Chief Executive Officer
Julie Cowie, Finance Director
Charles Stanley Securities - Nominated Adviser Tel: 0207 149 6000
Mark Taylor/Freddy Crossley
This information is provided by RNS
The company news service from the London Stock Exchange
END
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