Shares in Vanguard Natural Resources, LLC (NASDAQ:VNR) plunged 6.67% to $0.84 after the company missed an interest payment of about $15 million on its 7.785% of Senior Notes aggregating $381.8 million and due 2020.
The company averted a default event by taking recourse to the grace period allowed under the terms of the said notes, which is a period of 30 days from October 1, 2016. In the event it fails to make payment within the grace period it would deemed to be in default.
The sharp downturn in oil prices over the past two years has taken a severe toll on the finances of companies in the oil and gas sector. Last week, the Vanguard stock touched a 52-week low of $0.86 on news of an analyst’s downgrade.
The company has also been under liquidity pressures because its bankers cut its borrowing base 26% from $1.8 billion to $1.325 billion.
Vanguard Natural Resources, LLC (NASDAQ:VNR) makes new low
As of August 1, 2016, Evercore is advising the company on identifying and negotiating with new potential capital sources and other financial matters.
“The First Lien Lenders consented to the Company’s decision to preserve liquidity and flexibility pending the outcome of the fall borrowing base redetermination on the Credit Facility and as the Company continues to engage in constructive dialogue with new potential capital sources,” Vanguard said, referring to its decision to invoke the grace period.
Given the situation in the energy industry, and the problems facing companies such as Vanguard, the recent decision by OPEC to limit output is not a day too soon.
But it is a moot point whether OPEC members will adhere to the output limits to be decided at the next meeting of the cartel.
Nevertheless, oil prices appear to have stemmed their slide for the time being.
All that is apparently not cutting much ice with analysts, however. Yesterday, analysts at Raymond James downgraded Vanguard from Market Perform to Underperform.
Shares in Vanguard touched a new 52-week low of $0.81 yesterday.