K100mil deal

By Shirley Mauludu
THE Government has sold its shares in Oil Search Limited, making around K100 million from the transaction.
The national oil and gas company Kumul Petroleum Holdings Limited (KPHL), acting on behalf of the State, said the divestment was executed after the market closed last Thursday by unwinding the equity collar loan with JP Morgan Securities and UBS AG Australia branch.
KPHL chairman Sir Moi Avei said the board had decided to review all investments it had made before – one of which was to sell its shares in Oil Search.
“The board has made a commercial decision, to divest its interest in Oil Search,” Sir Moi said.
“The board made the decision. My job as the chairman is to protect the interest of Kumul Petroleum. Thursday was the right moment when shares were trading in our favour.”
He said KPHL made about A$35 million (K87.33mil) as a result of the transaction. KPHL managing director Wapu Sonk said: “It was a UBS collar loan where the value of the parcel of shares on any day was supported by the loan itself, which in this case was 149 million shares — meaning no other security was provided and the collar was protected by placing a series of calls and puts options.
“All we had been doing is pay interest and grow it, waiting for the time that we would come up with the loan amount to pay.
“The current oil price environment  is likely to extend for a few more years.
“So we’ve waited for the right moment when the share was trading at the right price and we’ve made the decision to divest the shares with Oil Search in this transaction.”
He said it did not mean cutting off all ties with Oil Search.
“We are a strong partner in the oil and gas projects in PNG. We will continue to work with them. It’s just that we cannot go on with the UBS collar loan.”
UBS AG is a Swiss global financial services company incorporated and headquartered in Zurich.
Sonk said it had cost KPHL about US$254mil on interest payment and payment of a bridging loan at the start of the deal.