Canadian energy firm Canacol Energy Ltd., Colombia's leading private natural gas producer, is in urgent negotiations to secure a short-term emergency loan from its creditors. The move comes as the company races to restructure its mounting debt before its available cash runs out completely, according to sources familiar with the discussions.
Urgent Financing Talks and Creditor Hierarchy Concerns
The company is actively discussing a debtor-in-possession (DIP) financing deal, a form of emergency funding used by companies under financial distress. However, these talks are delicate and happening behind closed scenes. The need for speed is critical, as Canacol faces falling gas production and increasing financial losses.
This proposed loan could create significant friction among the company's various lenders. A DIP facility typically grants the new lenders seniority over existing creditors in the repayment hierarchy. Canacol's debt structure includes $500 million in outstanding dollar bonds and a secured credit facility with Macquarie Group, which currently holds a superior position to the bonds. The company also has a revolving credit facility with a syndicate of banks, set to expire in 2027.
Analyst Daniel Guardiola from BTG Pactual in Bogota pointed to a deeper issue of credibility. "They were really looking for their lucky strike and it never showed up," Guardiola said. "Gas prices were skyrocketing, their EBITDA generation hit record highs, and still they were not able to secure financing from markets. And I think it's because of lack of credibility."
A Downward Spiral: From Pipeline Loss to Court Protection
The roots of the current crisis trace back to 2023, when Canacol lost a major pipeline contract. Since then, its gas production has been in a steady decline. The drop in output reached levels that activated an acceleration clause in its loan agreement with Macquarie, forcing quicker repayment.
Despite the clear financial strain, the company's management had consistently assured investors that it was in a strong position to meet its debt obligations, publicly dismissing any notion that a restructuring was necessary. This stance has now dramatically reversed.
On November 19, Canacol announced it had obtained creditor protection in Canada. The following week, it filed for relief under Chapter 15 of the U.S. bankruptcy code, which deals with cross-border insolvencies. The formal proceedings involve major financial and legal advisors:
- A group of bondholders is being advised by investment bank Houlihan Lokey.
- In the main Canadian process, Canacol is advised by law firm Gowling WLG.
- The banking syndicate has retained the law firm Clifford Chance.
- KPMG Inc. is serving as the court-appointed Monitor in the proceedings.
Future Prospects: Sale Seen as Best Hope for Recovery
After years marked by operational setbacks, unsuccessful exploration campaigns, and poor communication with the investment community, many stakeholders now view a potential acquisition as the most viable path to recovery.
This week, Ricardo Roa, the CEO of Colombia's state-owned energy giant Ecopetrol, indicated that Canacol was seeking a sale, though he did not provide details on the status of any talks.
Despite its troubles, analysts see underlying value in the company. "There is still strategic value to Canacol's production and assets," wrote Seaport Global strategist Bevan Rosenbloom in a November 25 note. He highlighted that Colombia faces a structural shortage of natural gas and that Canacol remains the country's second-largest producer overall.
The coming weeks will be decisive as the company attempts to bridge its financial gap through complex negotiations with creditors, all while its operational challenges continue.
