Exchange Offers and Consent Solicitation
On August 25, 2016, the Company issued a press release regarding the commencement of private offers (the
Exchange
Offers
) to eligible holders to exchange its outstanding 10% Senior Notes due 2017 (the 2017 Notes), issued under an indenture, and its outstanding 10% Second Lien Senior Secured Notes due 2021 (the
2021 Notes
and together with the 2017 Notes, the
Existing Notes
), also issued under an indenture, for up to (i) $280.3 million aggregate principal amount of its newly issued 10% Second Lien Senior Secured PIK Notes due
2021 (the New Notes), and (ii) assuming that all of the Existing Notes are properly tendered to the Company in the Exchange Offers prior to the early tender date, 3,517,000 shares of its common stock, all on the terms and subject to
the conditions set forth in a Confidential Information Memorandum and Consent Solicitation Statement. In connection with the Exchange Offers, the Company is soliciting consents (the
Consent Solicitation
and together with the
Exchange Offers, the
Exchange Offers and Consent Solicitation
) from holders of the 2021 Notes to certain proposed amendments to the indenture governing the 2021 Notes and the registration rights agreement with respect to the 2021
Notes. A copy of the press release is filed herewith as Exhibit 99.1 and incorporated by reference in this current report.
This filing
shall not constitute an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such
jurisdiction.
Debt Commitment Letter
In connection with the Exchange Offers and Consent Solicitation, the Company entered into a commitment letter (the
Commitment
Letter
) with Franklin Custodian Funds Franklin Income Fund (
Franklin
), pursuant to which Franklin committed to provide a multi-draw term loan facility to the Company in the aggregate principal amount of
$50 million (the
Commitment Facility
), subject to certain conditions precedent, including approval by the Companys board of directors and the successful consummation of the Exchange Offers and Consent Solicitation
whereby at least 87% of the total combined outstanding aggregate principal amount of the Existing Notes exchange for New Notes. The Commitment Letter expires if the Commitment Facility does not close on or before 11:59 p.m. (Pacific Standard Time)
on October 21, 2016. In connection with its entry into the Commitment Letter, the Company made a deposit of funds to cover all reimbursable expenses of Franklin pursuant to the terms of the Commitment Letter.
The Company expects the Commitment Facility will bear interest at a rate equal to 10% per annum. The Company also expects the Commitment
Facility will have a maturity date of four years after the closing date of the Commitment Facility, to be subject to no prepayment premium and to be subject to certain mandatory prepayment events.
The Company expects that the Commitment Facility will contain affirmative and negative covenants which may restrict its ability to, among
other things, incur indebtedness, make distributions and make capital expenditures. The Companys compliance with the Commitment Facility is expected to be based on the maintenance of the ratio of estimated future net revenues from the
Companys proved developed reserves, discounted at 10% and utilizing strip pricing and hedges in place, to the total principal amount committed under the facility.
The Company expects that the Commitment Facility will be secured by a first priority and perfected lien and security interest on substantially
all of its, and certain of its subsidiary guarantors, property and will replace the Companys existing senior secured bank credit facility.