Energy Company Defaults on Canada Pension Debt; May Shut Doors If Deal Can’t Be Struck

broken piggy bank over one dollar bills

Oil Sands producer Laricina Energy Ltd. has defaulted on debt issued by the Canada Pension Plan Investment Board (CPPIB), and says it may have to shut its doors if a plan can’t be worked out with the CPPIB.

From the Wall Street Journal:

Junior oil sands producer Laricina Energy Ltd. said it may no longer be able to fund its operations after defaulting on financing extended by Canada’s largest pension fund, the CPP Investment Board.

The privately-held company’s chief executive said Monday that Laricina is in talks with the fund and expressed confidence an agreement would be reached to allow the company to stay in business after it breached a debt pact covenant.

“We would have every expectation that we would come to a conclusion with CPP in our discussions,” CEO Glen Schmidt said in an interview. “CPP has been a strong supporter of the company,” he said.

A representative for the CPP Investment Board declined to comment.

On Friday, Laricina said its average production in the quarter ended last month was 18% below a target of 1,255 barrels a day, which violated the terms of 150 million Canadian dollars ($127.6 million) in debt extended earlier in the year by the CPP.


The notes issued to the CPP, which yield 11.5%, were secured against the assets of the company, which Laricina said totaled C$178 million as of Dec. 31. That is down from C$218.5 million as recently as June 30, 2014.


In addition to debt financing, the CPP said in its latest annual report that it has made C$350 million in equity investments in Laricina. Other key investors include Lime Rock Partners, Kayne Anderson Capital Advisors and Mount Kellett Capital Management, according to a Laricina presentation dated Sept. 11, 2014.

The CPPIB manages approximately $234 billion in assets.


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