DEAL OF THE WEEK - BG GROUP
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Allen & Overy has advised BG Group on an agreement revision that has resulted in it acquiring the share capital of Enron Oil & Gas India Limited (Eogil).
The US Bankruptcy Court has approved the terms of the new agreement, following an objection from a rival bidder and a renegotiation of terms to satisfy Enron's creditors.
BG's acquisition comprises a 30 per cent stake in two of India's most valuable production fields, the Tapti gas field and the Panna/Mukta oil and gas fields on India's west coast.
The Eogil purchase is particularly crucial for BG as it includes a 62.64 per cent interest in the CB-OS/1 exploration block licence. BG India chief executive Nigel Shaw recently said that BG planned to invest $18m (£12.6m) in this block by November. BG hopes to increase its investment in Indian exploration, production and liquefied natural gas to more than $1.3bn (£910.52m) from $500m (£350.2m) in the next three to five years.
Last October, the firm advised BG Group on the $388m (£271.76m) purchase of Eogil, but this was invalidated following Enron's recent filing under Chapter 11 of the US bankruptcy code. Because of this, A&O was asked to negotiate new purchasing terms, including approval from Enron's creditors, who requested a reduction in the level of insurance cover. This led to a reduction in the value of the deal by $38m to $350m (£245.14m).
A&O corporate partner Tim Shilling, who led the deal in October and during the renegotiation, said that the creditors wanted less expenditure on warranties and indemnities to lessen the risk of future liabilities falling on Enron.
At the US Bankruptcy Court, where A&O negotiated last October and in February, the Indian national oil company, ONGC, requested a postponement of the court decision in order for it to carry out due diligence prior to a bid of its own. The request, which was turned down by the court, was part of ONGC's drive to expand its business after the Indian government's liberalisation of the energy market and the dismantling of the administered price mechanism.
A&O's role included putting together new agreement terms that were put to the Bankruptcy Court when seeking to arrange a court scheduling order. The objection was submitted and the bankruptcy judge had to consider the best price offer from various applicants.
The work under Shilling's leadership included input from New York corporate associate Paul Burns, who helped to renegotiate the terms of the October transaction based on bankruptcy advice from A&O's New York partner Ken Coleman and senior counsel Hugh McDonald.
Shilling said: "We were delighted to be able to bring the skills of our UK and US corporate and business restructuring into play in such a vital role, advising BG on the restructuring of the transaction."
Enron was advised by Vinson & Elkins in New York and Houston, and Weil Gotshal & Manges in New York.