Pacific Rubiales restructuring will leave 0.006%, and at least 29.3%, of the company to the existing shareholders and plan sponsor, respectively

The debt of Pacific Exploration (formerly, Pacific Rubiales), which filed for protection under the CCAA in April, 2016, consists of U.S.$4.1B of notes, U.S.$1.3B of loans and U.S.$0.50B of DIP financing, of which U.S.$0.24B was advanced by Catalyst. Under the proposed CCAA Plan, the notes and loans will be exchanged for approximately 58.2% of the Corporation’s fully diluted shares, the Catalyst DIP financing will be exchanged for 29.3% of the fully diluted shares – and the DIP providers will hold warrants (with a nominal exercise price) to acquire 12.5% of the fully diluted shares. In addition, those who acted to support the recapitalization before a specified time will receive, in aggregate, an extra 2.5% of the fully diluted common shares (the “Early Consent” shares- which effectively come out of the shares otherwise receivable by those slower to act). The holders of the notes and loans also will have the option to cash in some of their common shares, to be funded out of additional cash subscriptions by Catalyst and some others. Existing common shareholders will hold 0.006% of the post-Plan shares.

The U.S. tax disclosure indicates a risk of the Early Consent shares being treated as a taxable consent fee, whereas the Canadian disclosure is clear that they are part of the exchange consideration.

The U.S. tax disclosure discusses the risk that U.S. holders would receive rollover treatment – on the basis that their debt holdings are “securities,” or that the Plan would be considered to be a recapitalization. There are no Canadian risk disclosures.

Neal Armstrong. Summary of Pacific Exploration Circular under Other – Recapitalizations or note exchanges.