FORMER market darling OZ Minerals was last night confident that talks over its $US420 million ($A640 million) refinancing facility were a "resolvable issue" but was conscious it had burnt up most of the past few days without reaching an agreement with its bankers.
OZ had been forced into hurried weekend negotiations with its bankers after a crucial debt extension deal was thrown into disarray by a rogue bank in the seven-member financing syndicate.
OZ thought it had a debt extension deal in the bag early last week. But the rogue bank requested a set of conditions that was delivered to a shocked OZ on Thursday evening, prompting OZ to call an emergency board meeting on Friday and request a trading halt on its shares.
The rogue bank apparently had agreed to the extension being sought by OZ but on terms that the OZ board believed would have put the company in an untenable situation, due mainly to any acceptance of the new conditions putting OZ in breach of existing conditions from its other lenders.
The potential for OZ's end-of-November refinancing plans to fall over was flagged earlier this year when the group was created by the merger of Oxiana and Zinifex, through a bid by Oxiana for Zinifex.
Zinifex said in its scheme booklet for the merger that refinancing of the $US420 million facility and a smaller one of $US140 million — held by ANZ and the Royal Bank of Scotland — was planned to be completed by the end of November.
"But there can be no assurance that this will occur within that timeframe," Zinifex said in early May. Just weeks later, investment bank Lehman Brothers collapsed, sparking the global financial crisis.
OZ is seeking an extension until January 31 on the $US420 million loan facility. The extension was technically required by yesterday but for practical purposes by the close of business on Friday.
ANZ and the RBS are also members of the seven-member syndicate holding the $US420 million facility. The pair had previously agreed to an extension of their $US140 million facility, so it is assumed neither is the rogue bank.
OZ's debt refinancing woes capped off a bad week for the group. Early last week it was forced to disclose that non-executive director Owen Hegarty had dumped 10 million shares on the market after receiving a margin call.
Mr Hegarty was the founder of Oxiana and turned it from a penny dreadful into the group that had the upper hand in the merger with Zinifex. The combined group (OZ) had a $12 billion market value when the merger was announced on March 3. But it is now all of $1.7 billion.
Sorting out the group's debt issue has fallen to OZ chief executive Andrew Michelmore, the former chief executive of Zinifex. He is under pressure to clear up the issue quickly. In a research note on OZ, Credit Suisse said that in light of the debt situation, it could not maintain its "outperform" rating on OZ. It has downgraded its rating to "neutral."
The reporter owns OZ shares
OZL Price at posting:
$5.50 Sentiment: None Disclosure: Not Held
