Canacol Energy Ltd., Colombia's leading private gas producer, is actively seeking a short-term loan from its creditors, known as debtor-in-possession (DIP) financing, as it works to restructure its significant debt before its cash reserves are depleted. The Canadian company is under immense pressure to finalize this deal quickly, facing declining output and mounting losses. However, such a loan presents a challenge, as it would likely grant new lenders seniority over existing creditors, potentially creating a rift among them.

The company's financial troubles intensified following the loss of a major pipeline contract in 2023, which led to a steady decline in production. This decline reached levels that triggered an acceleration clause in its secured credit facility with Macquarie, which currently holds a superior rank to Canacol's $500 million in dollar bonds. Additionally, Canacol has a revolving credit facility with a syndicated group of banks set to expire in 2027.

Despite its growing difficulties, Canacol had previously assured investors of its strong position to repay debt and rejected the notion of restructuring. This stance contributed to a perceived lack of credibility among investors, as noted by Daniel Guardiola, an analyst at BTG Pactual, who highlighted the company's inability to secure market financing even during periods of skyrocketing gas prices and record EBITDA generation.

The company formally sought creditor protection in Canada on November 19 and subsequently filed for relief under Chapter 15 of the US bankruptcy code the following week. In the ongoing restructuring process, a group of bondholders is being advised by investment bank Houlihan Lokey, while Canacol itself is being advised by law firm Gowling WLG. The banks involved have retained Clifford Chance, with KPMG Inc. serving as the Monitor in the Canadian proceedings.

After years marked by operational problems, unsuccessful exploration efforts, and poor communication with its investor base, many investors now view a potential acquisition as their most viable path to recovery. Ecopetrol's CEO, Ricardo Roa, recently indicated Canacol's interest in a sale. Analysts like Bevan Rosenbloom of Seaport Global underscore the strategic value of Canacol's production and assets, given Colombia's structural shortage of natural gas and Canacol's position as the second-largest producer in the country.