BUSINESS

Dome’s deepening saga

D’ARCY JENISH July 6 1987
BUSINESS

Dome’s deepening saga

D’ARCY JENISH July 6 1987

Dome’s deepening saga

For the past month senior executives of Calgary-based Dome Petroleum Ltd. have been getting a cool reception from most of the company’s 56 creditors. One by one, the bankers rejected as inadequate the proposed $5.1-billion sale of Dome to Amoco Canada Petroleum Co. Ltd. But last Thursday, at the company’s annual meeting in Calgary, Dome chairman J. Howard Macdonald struck back at the bankers. He staunchly defended the proposed sale: “There are no losers in this decision.” And he pointed out that the banks do not have many alternatives. Putting Dome into receivership, he warned, would be “pretty messy and singularly unfortunate.”

But Dome’s creditors appear to be holding steadfast in their opposition to the deal and are looking for alternatives. Under the terms of the agreement between Dome and Amoco, the two companies gave Dome’s secured creditors, a collection of Canadian and foreign lenders, until June 30 to either approve or reject the deal.

That date coincides with a deadline arranged last fall with the creditors to waive all interest payments on Dome’s loans while a new debt restructuring agreement was arranged—the third since 1982. A senior executive with a

U.S. bank said that if the Amoco deal fails because the lenders will not accept it, the likely alternative would be further debt restructuring negotiations. He said that Dome sent a rescheduling proposal to all the lenders last spring and, while a few opposed it, the package had more support than Amoco’s offer now has. In any case, the American banker said that a Dome receivership is out of the question. “We are all smart enough to avoid that,” he said.

In the meantime, about 25 unsecured foreign creditors, who are owed $1.5 billion by Dome, have formed a committee to strengthen their demands for a better settlement than Amoco has offered. Under that agreement, they would receive 35 cents on the dollar, payable in cash and securities. Those creditors hired Toronto law firm Goodman & Goodman to represent them, Maclean's has learned. A five-member committee has been meeting almost daily, and last week about 40 bankers, representing the entire group, crowded into the Goodman & Goodman boardroom to plan strategy. “We’re not going to take the deal as offered,” one of the bankers said.

Amoco and Dome reached their accord in mid-April and revealed it to

the banks at a threehour meeting in Toronto on May 14. Within days, three major Canadian banks —Royal Bank, Bank of Montreal and Toronto-Dominion Bank—along with New York-based Citibank, who in total are owed about $4 billion, declared that the sale was unacceptable. They now insist that their positions have not changed despite private discussions with Dome executives. Altogether, Dome owes its creditors $6.3 billion, but U.S.-owned Amoco is offering only $5.1 billion in cash and securities. The secured creditors would receive on average 88.5 per cent of the value of their loans. Amoco has of|fered the common z shareholders $1.50 a £ share for stock that 5 once traded for more 2 than $25 but last week wallowed in the $1.10 range. Preferred shareholders would get $7.50.

Despite the apparently unequivocal opposition of the Dome creditors, Amoco Canada president T. Don Stacy told Maclean's last week that he is still confident of salvaging the deal. “We’re getting ready to meet with some of the lenders,” Stacy said. Last week he met two groups of Dome suppliers in Toronto to argue the merits of Amoco’s offer and guarantee that his company would honor all Dome’s obligations. Amoco has also tried to appease the federal government by offering to pay Dome’s $180 million in outstanding petroleum and gas revenue tax. And in order to undermine nationalist opposition to Amoco’s bid, the company has promised to sell shares to the Canadian public.

While Dome’s future appears to rest with either Amoco or the banks, most observers are not prepared to discount Toronto-based TransCanada PipeLines Ltd. entirely. Toronto energy consultant Robert Robinson of Loewen, Ondaatje, McCutcheon Inc. said that the giant natural gas transmission company, which made one unsuccessful offer in April, would probably wait for the banks to turn down the Amoco deal before bidding again. Otherwise, he said, Amoco could probably sue TCPL or Dome. The end of the Dome saga promises to be a complex and convoluted affair.

D’ARCY JENISH

JOHN HOWSE