Dome Petroleum Ltd's revised debtrestructuring plan keeps the company alive and improves its
appeal as a takeover target, but full debt repayment depends on
a sharp oil price rise, oil and banking analysts said.
    Dome's complex proposal to let creditors link some or all
of their debt to oil-indexed debentures or convert it to equity
is "very cut and dried and to the point," Peters and Co Ltd
Calgary-based energy analyst Wilf Gobert said.
    Dome "is saying, This is the way it is. There isn't enough
money to pay you back,'" he added.
    The plan "strikes me as a very pragmatic thing to do,"
First Marathon Securities Ltd oil analyst Jim Doak commented.
    He said the plan seeks to formally tie payments to
creditors with the price of oil, which governs Dome's cash flow
and ability to service its debt.
    Dome expects its total debt to reach 6.4 billion Canadian
dlrs by June 30, 1987, when an interim debt rescheduling plan
expires and Dome hopes to implement the long term plan.
    Gobert said the plan would rank secured and unsecured
creditors in a complex series of repayment categories or "an
agreed pecking order of what your (creditors) claim to assets
is."
    Potential suitors would find Dome easier to swallow under
the debt restructuring plan because it proposes to resolve
competing claims on assets pledged to secured creditors and on
remaining unpledged assets, Gobert and others said.
    "Certainly the restructuring plan, once it's agreed to and
put in place, is going to make it easier for someone to come in
and look at doing a deal on it (acquiring the company)," Gobert
remarked.
    "It's going to be a lot easier than it is right now because
you'll have settled the pecking order question," he added.
    Gobert believes the debt plan may be partly motivated by a
desire to sell Dome Petroleum as a whole.
    "If the creditors wanted to liquidate their bank loans they
could do it in an orderly fashion through the sale of the
company, as opposed to dismemberment," he said.
    Dome's proposal includes rescheduling secured debt payments
over a 15 to 20 year schedule, linking payments to cash flows
generated by assets pledged against loans and establishing
interest rates that allow for changing oil prices.
    Creditors' only real alternative to Dome's plan is "an
asset grab which would liquidate the company at distress
prices, and the banks would spend the next 20 years in court
deciding who had what asset," First Marathon's Doak said.
    For Dome's creditors, the plan does not offer a quick
method to recover loans, but extends payment time in the hope
that oil prices will rise, increasing the amount of the
company's debt payments, Merrill Lynch Canada Inc bank analyst
Terry Shaunessy said.
    The plan "is not a solution. It says give me more time and
let's keep our fingers crossed that oil goes way up."
    Doak and Shaunessy estimated oil prices would have to rise
to about 28 to 30 U.S. dlrs a barrel to fully service all of
the company's debt.
    Analysts said the plan would ensure the company continues
to operate, but provides little other benefit to common
shareholders.
    "From a common shareholder standpoint, all this does is
sort of keep him on the life support system, because there
isn't any equity unless you get a big increase in oil prices,"
Gobert remarked.
    Analysts said Dome's common shares, trading today at 1.12
dlrs, off four cents, on the Toronto Stock Exchange,
essentially represent a long term warrant pegged to oil prices.
    "You have to be looking at an extremely high price of oil
in the context of historical trends before there's any residual
value for the common shareholders," analyst Doak said.
    While Dome's plan said lenders will be able to convert debt
to common shares, the amount of dilution depends on share
conversion prices still to be negotiated and how much lenders
would choose to convert, the company said.
 Reuter
