Canacol Energy seeks creditor protection to pursue restructuring

Canacol Energy (CNNEF) and its subsidiaries are seeking an order for creditor protection from the Court of King’s Bench of Alberta pursuant to the Companies’ Creditors Arrangement Act. The CCAA is a federal statute in Canada that allows qualifying insolvent companies to restructure their affairs under court supervision, with the aim of maximizing value for stakeholders and preserving business operations. Under the CCAA, the Company continues operating while it works to restructure its affairs. The CCAA is designed to facilitate a stay of proceedings, giving the company the stability and “breathing room” from creditor actions while it develops a plan of arrangement with creditors or otherwise effect its restructuring. The Monitor is appointed by the court to oversee the process, report to the court, and liaise with stakeholders. The decision to commence CCAA proceedings was made by the Board of Directors of the Company after careful consideration of the Company’s financial position and extensive consultation with legal and financial advisors. The Board of Directors has considered all other options and concluded that restructuring under the CCAA with immediate protection from creditors is the best alternative. The Company faces a looming liquidity crisis from upcoming interest and principal payments under its funded debt obligations; an unfavorable arbitration decision in a claim by VP Ingenergia giving rise to a $22M arbitral against certain of the Company’s subsidiaries; reduced natural gas production; and increased trade and other accounts payables. The Company is seeking an Initial Order that includes, among other things: a stay of proceedings in favor of the Company and its Canadian subsidiaries; and the appointment of KPMG Inc. as monitor of the Company. The Company intends to seek recognition of the Initial Order and its CCAA proceedings in the United States of America pursuant to Chapter 15 of title 15 of the United States Bankruptcy Code, 11 U.S.C. Section 101-1532 and in Colombia pursuant to Title III of Law 1116 of 2006 of the Republic of Colombia or other applicable Colombian law. The board of directors of the Company will remain in place and management will remain responsible for the day-to-day operations of the Company, under the oversight of the Monitor.