Oilexco shares wilt as subsidiary faces insolvency

Shares of Oilexco Inc., already battered as the price of oil has fallen, dropped 75 per cent in Wednesday morning trading on the TSX after the company said its main subsidiary is insolvent.

Oilexco shares were off 67 cents at 22 cents. The stock had a one-year high in June of $19.50.

The Calgary-based company said early Wednesday that its wholly owned subsidiary, Oilexco North Sea Limited, intends to file petitions for administration — a form of creditor protection — in the High Court in the United Kingdom. Oilexco said the filing could be made as soon as early next week.

The company said it was told Wednesday by the Royal Bank of Scotland plc on behalf of a syndicate of lenders that they are not prepared to advance any further funding to Oilexco North Sea. The news came after the syndicate approved $47.5 million in bridge financing on Dec, 17.

"Oilexco does not have any other source of funding at this time and has therefore concluded that an administration must be pursued," the company said.

Oilexco said several parties have indicated their interest in acquiring Oilexco North Sea or its assets. Morgan Stanley and Merrill Lynch have already been hired by Oilexco to help it weigh its options.