Troubled UK-independent Afren defaulted on its 2016 bonds Wednesday after refusing to make a $15 million interest payment in order to preserve cash for an ongoing capital structure review.

Last month the company utilized a 30 day grace period for the payment that was initially due on February 1.

While the company officially defaulted on its 2016 bonds it said the decision will not result in an “immediate obligation” to repay its 2016 notes or any other debt facilities.

Afren added that an ad hoc committee of its largest bondholders has “no current intention” to take enforcement action for the default.

The company is continuing talks with its advisers and investors to solve its immediate liquidity issues and future funding needs.

Afren warned that a new funding or restructuring deal could force it to issue new equity that “will substantially dilute the interests of the company’s current shareholders.”

Shares of Afren slid as much as 50 percent during early trading Wednesday.

The Africa focused upstream has lost over 90 percent of its market value since July as weak oil prices and dry wells in Kurdistan pummeled its bottom line, Reuters said.

Last week Afren won some breathing room after lenders approved a three month payment deferral for a $50 million amortization payment due on a $300 million Ebok debt facility.

The payment is now due on March 31.

The company had a cash balance of $235 million as of December 31 but available liquidity is “significantly lower” due to restricted and segregated cash balances put in place to address operational requirements.

Afren said it is still in discussions to negotiate a potential merger with Nigeria’s Seplat although “there can be no certainty that an offer will be made.”

In October Afren axed CEO Osman Shahenshah and COO Shahid Ullah after the two executives were found to have accepted $20 million in unauthorized payments from third parties.

The two men paid Afren back the funds earlier this month and the company agreed to not pursue legal proceedings.



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