Item 1.01.
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Entry Into a Material Definitive Agreement.
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As previously disclosed, on
November 21, 2017, Stone Energy Corporation (the
Company
) and certain of its subsidiaries, Sailfish Energy Holdings Corporation (
New Talos
) and Sailfish Merger Sub Corporation, entered into a Transaction
Agreement (the
Transaction Agreement
) with Talos Energy LLC (
Talos Energy
) and its indirect wholly owned subsidiary, Talos Production LLC (
Talos Production
), pursuant to which the Company and
Talos Energy agreed to combine in an
all-stock
transaction. In connection with the combination of the Company and Talos Energy, Talos Production and Talos Production Finance Inc. (together with Talos
Production, the
Talos Issuers
) launched an offer to exchange (the
Exchange Offer
) the Companys outstanding 7.5% senior secured notes due 2022 (the
Stone Notes
) for a combination of new
11.0% second-priority senior secured notes due 2022 of the Talos Issuers and cash, as more fully described in the Exchange Offer. Concurrently with the Exchange Offer, the Talos Issuers solicited consents from the holders of the Stone Notes to adopt
certain proposed amendments to the indenture governing the Stone Notes (the
Stone Notes Indenture
) and to release the collateral securing the obligations under the Stone Notes.
The early tender and withdrawal deadline for the Exchange Offer and consent solicitation occurred on April 2, 2018 at 5:00 p.m., New York
City time (the
Early Deadline
). As of the Early Deadline, the Talos Issuers received sufficient consents, which consents are no longer subject to withdrawal, from holders of the Stone Notes to effect the proposed amendments to the
Stone Notes Indenture and release the collateral securing the obligations under the Stone Notes. The proposed amendments and the release of collateral, to be effected by the Supplemental Indentures referred to below, will not become operative until
immediately prior to the delivery of the consideration for the Stone Notes on the closing date of the transactions contemplated by the Transaction Agreement.
On April 3, 2018, the Company entered into Supplemental Indenture No. 1 (the
First Supplemental Indenture
) with
Stone Energy Offshore, L.L.C., as subsidiary guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent, which, upon becoming operative, will eliminate (i) substantially all of the restrictive covenants,
(ii) certain reporting obligations, (iii) all events of default other than the failure to pay principal, premium or interest on the Stone Notes and the commencement of bankruptcy proceedings or an order under bankruptcy law, in each case,
with respect to the Company and (iv) certain provisions related to the foregoing contained in the Stone Notes Indenture. The restrictive covenants in the Stone Notes Indenture that will be eliminated upon the First Supplemental Indenture
becoming operative include those relating to an offer to repurchase upon change of control, incurrence of indebtedness and issuance of preferred stock, restricted payments, liens, restrictions on distributions from restricted subsidiaries, sales of
assets and subsidiary stock, transactions with affiliates, additional subsidiary guarantors, and certain conditions to a consolidation by the Company.
On April 3, 2018, the Company also entered into Supplemental Indenture No. 2 (the
Second Supplemental Indenture
and, together with the First Supplemental Indenture, the
Supplemental Indentures
) with Stone Energy Offshore, L.L.C., as subsidiary guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent,
to release all of the collateral securing the obligations under the Stone Notes and to eliminate the restrictive covenant in the Stone Notes Indenture related to after acquired property. As a result, upon the Second Supplemental Indenture becoming
operative, the obligations under the Stone Notes will no longer be secured.
The description of the Supplemental Indentures is qualified
in its entirety by reference to the full text of the Supplemental Indentures, copies of which are attached as Exhibit 10.1 and Exhibit 10.2 to this Current Report on Form
8-K
and are incorporated into this
Item 1.01 by reference.