It’s a bit like your pal Dave promising to pay you back that tenner on Friday but then changing it to Monday. Cheers Dave.
ARCM also says the oilfields Premier will obtain will store up trouble for the future and questions whether the FTSE 250 firm is pulling the wool over the eyes of investors by not being transparent in its calculations and basing the deal on punchy commodity prices.
Yet some in the City question ARCM’s motives. In December the hedge fund was forced to disclose a secret 17% short position in Premier shares, unknown to the Premier board and fellow investors. Rivals have urged the Financial Conduct Authority to investigate.
The hedge fund claims it is a benign hedge on the massive Premier IOUs it owns (indeed the $455 million of debts dwarf the $190 million short position) but analysts say ARCM’s main motivation now is to kill off the deal so it can stem losses on the short.
Broker Numis said the hedge fund “lacked credibility” for attacking Premier but failing to mention the short.
One Premier shareholder also told the Standard ARCM was using its position as creditor to “screw equity holders” but had sympathy for this approach. “They are making their own catalyst.”
Premier has a myriad of other lenders alongside ARCM including Lloyds Bank, DNB, Deutsche Bank, Fortress and Verde (the latter two hedge funds not known to be shrinking violets).
Creditors will meet next Wednesday to vote on the debt extension plans.
Premier’s secondary debts also trade at 100p in the pound, a sign that impending debt Armageddon is not on the cards.
If the deal is so bad, as ARCM insists, then why do most of Premier’s lenders back the idea?
Market sources believe ARCM has already made big profits on the debt portion — buying as low as 55p in the pound — but now wants to preserve that gain by reversing losses on the short made when shares rallied. To do that it aims to cast doubt on the deal.
It’s hard to fathom whether ARCM is a genuinely concerned investor ringing the alarm bell or a cunning hedge fund looking to protect its own economic interests. Perhaps it is both.
City sources say part of ARCM’s objection is rooted in the fact its own plan to fix the debt was shot down.
ARCM had been shoulder to shoulder with creditors last year in negotiations with Premier but split from the group when the North Sea plan was agreed.
It then presented its own plan – which apparently involved raising money from shareholders to repay debt holders instead of buying oilfields – but this was rejected in favour of the North Sea acquisitions due to fears shareholders would snub the proposal.
ARCM plans to go to court to block the deal, yet if Premier cuts debt rapidly it could refinance and pay ARCM back just six months after it promised at the end of 2021, although there are still big questions marks over that.
Whatever happens, there may be more war stories to come in Belgravia.
