Since October, 1983, when he took over as chairman and chief executive officer of Calgary-based Dome Petroleum Ltd., J. Howard Macdonald has earned a reputation as a masterly negotiator. The 58-year-old Scot has repeatedly convinced Dome’s 56 international lenders to accept complex plans designed to reschedule the terms of the company’s staggering $6.3-billion debt. This week Macdonald faces another critical test. He must
convince lenders in Zurich and London to waive interest and principal payments on $568 million in loans until Feb. 27, 1987. If the lenders do not agree, Dome will be in default, and a lender could put the company into receivership. Said Macdonald: “We are convinced that, in the long term, oil prices will recover. It’s a matter of surviving the downturn.”
Indeed, it was the collapse of oil prices this year that forced Dome to again seek relief from its creditors. In February, 1985, Macdonald signed a landmark agreement with Dome’s major creditors, including the Canadian Imperial Bank of Commerce and Citicorp of New York, that rescheduled $5.3 billion of its debt for repayment by 1995. To meet its payments, Dome needed oil prices of at least $34 a barrel. But oil prices fell to the $20-a-barrel range by early this year from about $38 a barrel last December.
With the 1985 repayment plan in shambles, Macdonald—who earned $971,000 last year—began working on another rescheduling pact. In May, Dome’s secured lenders—those with oil and gas assets pledged as loan collat-
eral—agreed to defer some of Dome’s payments until Oct. 28, 1986, the deadline set to reach a new, long-term agreement. And Dome’s unsecured institutional lenders—mainly American and European banks—agreed to waive all payments due to them. The remaining $1.1 billion in unsecured debt, largely held by the public, was to be repaid as scheduled.
But the latest crisis facing the company erupted on Sept. 1. Dome an-
nounced that it would probably miss the Oct. 28 deadline for a new agreement—and that it planned to ask for the interim plan to be extended until Feb. 27, 1987. The company then wrote to its unsecured public creditors in Europe, explaining that unless they agreed to waive Dome’s payments the unsecured institutional lenders would probably not grant an extension.
Macdonald’s most crucial moment will likely occur on Sept. 30, when he is expected to meet the unsecured holders of $251 million worth of bonds and notes in Zurich. Swiss securities law states that all the creditors must agree to waive repayment. Still, Macdonald appears to have retained the confidence of Dome’s creditors—at least on this side of the Atlantic. Said one Canadian banker, who requested anonymity: “Who better to manage this mess? As long as he keeps Dome afloat there is hope that high oil prices can rescue the company.” For Macdonald, this week’s meetings are a chance to convince European creditors to accept that assessment.
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