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Item 1.01
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Entry into a Material Definitive Agreement.
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Underwriting Agreement
On June 14, 2018, Concho Resources Inc. (the
Company
) and certain of its current subsidiaries entered into an underwriting
agreement (the
Underwriting Agreement
) with Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC and Wells Fargo Securities, LLC, as representatives of the underwriters named in Schedule 1
thereto (collectively, the
Underwriters
), in connection with an underwritten public offering of $1,600 million aggregate principal amount of the Companys senior unsecured notes, consisting of $1,000 million aggregate
principal amount of the Companys 4.300% senior unsecured notes due 2028 (the
2028 notes
) and $600 million aggregate principal amount of the Companys 4.850% senior unsecured notes due 2048 (the
2048
notes
and, together with the 2028 notes, the
notes
). Following the closing of the Companys acquisition of RSP Permian Inc. (
RSP
) through an
all-stock
transaction (the
RSP Acquisition
), Concho intends to use the net proceeds from this offering to redeem, as previously announced, RSPs 6.625% senior notes due 2022 and
5.25% senior notes due 2025 (collectively, the
RSP notes
) for approximately $1.2 billion and to repay a portion of the outstanding indebtedness under RSPs existing credit facility, under which RSP had outstanding
borrowings of $445 million as of March 31, 2018. Pending the redemption of the RSP notes and the repayment of a portion of the outstanding indebtedness under RSPs existing credit facility, the Company intends to invest the net
proceeds from this offering primarily in cash, cash equivalents and U.S. government securities.
If the RSP Acquisition is not completed on or prior to
December 31, 2018, or is terminated on or prior to completion, the Company will redeem all of the notes at a price equal to 101% of the principal amount of the notes of the applicable series, plus accrued and unpaid interest to the redemption
date.
The issuance and sale of the notes has been registered under the Securities Act of 1933 (the
Securities Act
) pursuant to
an automatic shelf Registration Statement on Form
S-3
(Registration No. 333-225609), as amended, of the Company, filed with the Securities and Exchange Commission on June 14, 2018. Each series of the
notes will be issued pursuant
to a new supplemental indenture to the Companys existing indenture. The 2028 notes and the 2048 notes will each be guaranteed on a senior unsecured basis by certain of the Companys current
subsidiaries. Closing of the issuance and sale of the notes is expected to occur on July 2, 2018, subject to customary closing conditions.
The
Underwriting Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing, obligations of the parties and termination provisions. Additionally, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Underwriters may be required to make because of any of those liabilities.
Certain of the Underwriters or their affiliates have from time to time provided investment banking, commercial banking and financial advisory services to the
Company, for which they have received customary compensation. The Underwriters and their affiliates may provide similar services in the future. In particular, certain of the Underwriters or their affiliates are lenders under the Companys
credit facility. From time to time, certain of the Underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in the
Companys debt or equity securities or loans, and may do so in the future. In addition, certain of the Underwriters or their affiliates are holders of the RSP notes or lenders under RSPs credit facility and, accordingly, may receive a
portion of the proceeds of this offering pursuant to the repayment thereof with the proceeds of this offering.
The foregoing description of the
Underwriting Agreement is qualified in its entirety by reference to such Underwriting Agreement, a copy of which is filed herewith as Exhibit 1.1 and is incorporated herein by reference.