The marathon session took place last week in three sprawling suites of Toronto’s Royal York Hotel. After months of hectic negotiations, 200 lawyers, accountants and executives representing Dome Petroleum Ltd. and 56 of its creditors assembled to endorse an agreement on the financial future of the Calgary-based energy firm. It took the participants four hours to sign hundreds of documents, but when the process was over Dome officials were pleased. The creditors, including four of Canada’s largest banks, had approved a plan to reschedule $5.3 billion of the company’s $6.1-billion debt load over a 12-year period. They had also waived an earlier demand that Dome issue $350 million in new shares by Feb. 5 to raise funds for its depleted coffers. Declared Dome chairman J. Howard Macdonald: “At last we will be able to manage the company instead of spending most of our time trying to reschedule the debt.”
For Macdonald, a 56-year-old Scottish-born accountant, the signing marked a major victory in his efforts to put Dome back on a sound financial footing. Formerly the treasurer of the London-based Royal Dutch Shell Group, Macdonald joined Dome on a five-year contract in October, 1983. He found a company facing a financial crisis as a result of an aggressive acquisition binge that had left it with a $7-billion debt load. He immediately began to devise a plan to replace a bailout agreement that the company had signed with its bankers and the federal government in September, 1982, that would have given them 50-per-cent ownership of Dome.
As part of that arrangement, the federal government was to give Dome a $500million loan guarantee.
Desperate to avoid that plan, Macdonald and his aides began a nonstop campaign to strike a more palatable accord. In August, 1984, he succeeded in obtaining a tentative agreement from Dome’s North American bankers for last week’s 12-year restructuring pact. Initially, the bankers attached an important condition to the accord: they would only give final approval to the deal if Dome made a $350-million share issue to the public.
But last fall, as stock markets entered a stagnant phase (before rebounding early this year) and a worldwide decline in oil prices made energy company shares less attractive, Dome began to back away from its plans to launch a share issue. Dome finally succeeded in pleading with its creditors to sign the accord without it.
Under last week’s plan Dome will give $27 million in shares to the banks to pay their rescheduling fees. As well, Dome will issue another $100 million in common shares by late 1986 to shore up its capital base. Ultimately, the banks recognized that it was in their own interest not to push the company into bankruptcy—an event that would have shaken Canada’s entire banking system. Macdonald admits that Dome’s future success now rests on the vagaries of the oil market and the unpredictable course of interest rates—each one-per-cent drop in the prime rate saves Dome $52 million. But, provided there are no drastic developments, he declared, “Dome is back on the road to profitability.”
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