Chinese banks support Primeline amid arbitrations

first_imgExploration & production company Primeline Energy has received support from a group of Chinese banks amid the company’s ongoing arbitrations with Zhejiang Gas and CNOOC over a contract for the sale of gas from a field offshore China.Primeline informed on Monday that the group, made up of China Development Bank, China Export and Import Bank, and Shanghai Pudong Development Bank, has agreed to materially adjust the company’s capital repayments schedule and to reduce the company’s interest rate margin over 6 month LIBOR on its outstanding $232 million loan facility to support the company during arbitrations.Earlier this year, the company warned it might face default under its project finance loan with the group of banks.As previously reported, Zhejiang Gas, the buyer of the production from the company’s LS36-1 offshore gas field allegedly refused to offtake the contract quantity and pay the price as set out in the LS36-1 gas sale contract shortly after the field started commercial production, due to dramatic changes in the market.Thus, the company has received substantially lower cash flow than forecast and has faced challenging financial conditions. The company seeks to recover the substantial amounts outstanding due to it because of the disputes with Zhejiang Gas relating to the gas sales contract, and with CNOOC and its subsidiary relating to the gas sales contract implementation and petroleum contract. Each are the subject of current arbitration procedures.However, Zhejiang Gas argued earlier this year that Primeline had had no jurisdictional basis to initiate the arbitration proceeds against Zheijang, as the gas sales deal is between Zheijang and CNOOC, and not between Zheijang and Primeline. This prompted the court to put the dispute on ice until it resolves the claim launched by Zheijang.The E&P company also said on Monday that the amendments to the syndicate facility have deferred $36 million of capital repayments over the 12 month period that were previously due. The company has thus fully met the November 2016 repayment in the adjusted schedule and the loan service is maintained as normal.The syndicate has also reduced the company’s interest rate margin from 470bps to 335bps over 6 month LIBOR from November 2016 until disputes are resolved.last_img

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