Vanguard Natural Resources, LLC (NASDAQ:VNR) recently revealed that it would make use of the grace period on some of its convertible senior notes, to delay an interest payment of $15 million. The payment had been due last Wednesday and has stirred up concerns about the financial health of the company. It should be noted here that the grace period extends for a total of 30-days.
Analysts believe that a failure to make payment could mean that VNR defaults on its entire debt, resulting in eventual bankruptcy. Vanguard has a total debt of $1.8 billion, $1.4 billion of which is drawn from its credit line. A report from Reuters, published on September 20, stated that the company had hired Evercore Partners to analyze restructuring options. Currently, the company is valued at $1.95 billion and has total assets worth $358.5 million.
The company has been showing signs of poor financial conditions for some time now. Earlier in May, VNR sold 25,000 acres of oil rich land, one of its promising assets, for proceeds of $280 million. The company then used that cash to pay off bank loans, to allow it to expand its borrowing base and buy it some time. However, it still remains $68.5 million over its recently adjusted base of $1.325 billion. It should be noted here that Vanguard is not the only oil explorer to have used its grace period on interest payments this year. Several others had tried to do this, in a bid to reach a restructuring agreement with creditors, all of which had failed and resulted in each of the explorers filing for bankruptcy.
On the other hand, the company’s restructuring advisor, Evercore has recently helped Chesapeake Energy (NYSE:CHK), in successfully reducing its debt by $1 billion, while also lowering long-term maturity liabilities. Currently, the only way-out for the company, as it seems, is if it acquires capital from outside sources or through sale of its assets.
Vanguard Natural Resources, LLC (NASDAQ:VNR) closed at a share price of $0.52, at the end of the October 11 trading session, 0.66% higher than the session before, on a trade volume of 2.78 million.