Macro Tsimmis

intelligently hedged investment

BPZ Energy (BZP) update #10

Posted by intelledgement on Tue, 20 May 08

Yet another example of creative dilution here provided by our Peru-focused E&P spec play, BPZ Energy (BZP)…the company announced today that they had elected an option to force the conversion of $15.5 million of debt with the International Finance Corporation (“IFC”) into 1,491,819 common shares of BZP. The terms of the the company’s debt agreement with the IFC stipulate a conversion price of $10.39 per share, exercisable at BZP’s option, if the closing price of the common exceeds $18.19 for twenty consecutive business days.

Triggering the conversion improves the balance sheet—which makes borrowing easier if we need more money in future—and eliminates the need to ever pay the loan back. It eliminates the interest payments on the loan, thus freeing up cash to fund current operations and capital projects. And it cements a relationship with a strategic partner (who is not likely to flip the shares).

Manolo Zúñiga, President and Chief Executive Officer, stated, “With the conversion of the debt into equity, IFC now owns approximately 10% of BPZ. In addition to IFC’s equity participation, we are currently negotiating a term sheet with them on a credit facility of approximately $200 million subject to a borrowing base calculated from our recently announced oil reserve report and will enable us to continue developing the Corvina and Albacora oil projects, as well as an additional $120 million debt facility to fund the development of our gas-to-power project. We are extremely pleased to have IFC as a financial partner and look forward to continuing to build shareholder value through our relationship.”

Nice work, guys!


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