Item 1.01
|
Entry into a Material Definitive Agreement.
|
8% Convertible Senior Notes due 2023
As
previously announced, on September 14, 2018, Legacy Reserves LP, a Delaware limited partnership (the Partnership), Legacy Reserves Finance Corporation, a Delaware corporation (together with the Partnership, the Issuers),
and Legacy Reserves Inc., a Delaware corporation (the Company), entered into privately negotiated exchange agreements (the Exchange Agreements) with certain holders of the Issuers 8.000% Senior Notes due 2020 (the
2020 Senior Notes) and 6.625% Senior Notes due 2021 (the 2021 Senior Notes), pursuant to which the Issuers exchanged (i) $21.004 million aggregate principal amount of the 2020 Senior Notes for $21.004 million
aggregate principal amount of the Issuers new 8% Convertible Senior Notes due 2023 (the New Notes) and 105,020 shares (the Exchange Shares) of the Companys common stock, par value $0.01 (Common Stock),
and (ii) $109 million aggregate principal amount of the 2021 Senior Notes for $109 million aggregate principal amount of New Notes (collectively, the Exchange Transactions).
The Issuers and the Company offered the New Notes and Common Stock in reliance on the exemption from registration provided by
Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act). The Issuers issued the New Notes pursuant to an Indenture, dated as of September 20, 2018, by and between the Issuers, the guarantors party thereto
and Wilmington Trust, National Association (the Indenture).
The New Notes mature on September 20, 2023 (the
Maturity Date), unless earlier repurchased or redeemed by the Issuers or converted. On or before December 1, 2018, the New Notes are subject to redemption for cash, in whole or in part, at the Issuers option, at a redemption
price equal to 102% of the principal amount of the New Notes to be redeemed, plus any accrued and unpaid interest. Thereafter, the New Notes are subject to redemption for cash, in whole or in part, at the Issuers option at a redemption price
equal to 100% of the New Notes to be redeemed, plus any accrued and unpaid interest. In addition, the Issuers are required to make an offer to holders of the New Notes upon a change of control at a price equal to 101%, plus any accrued and unpaid
interest, and an offer to holders of the New Notes upon consummation by the Issuers or any restricted subsidiaries of certain asset sales at a price equal to 100%, plus any accrued and unpaid interest.
The New Notes bear interest at a rate of 8% per annum, payable semi-annually in arrears on June 1st and December 1st of each year, beginning
on December 1, 2018. The New Notes rank
pari passu
with the Issuers existing and future senior debt. The New Notes are effectively subordinated to the existing and future secured indebtedness of the Issuers to the extent of the
value of the collateral securing those obligations and structurally subordinated to the existing and future indebtedness of the Issuers subsidiaries. The New Notes were issued at par.
The New Notes are convertible into shares of Common Stock at an initial conversion rate of 166.6667 shares per $1,000 principal amount of New
Notes, which is equal to an initial conversion price of $6.00 per share of Common Stock.
The New Notes are convertible, at the option of
the holders, into shares of Common Stock at any time from the date of issuance up until the close of business on the earlier of (i) the business day prior to the date of a mandatory conversion notice, (ii) with respect to a New Note called for
redemption, the business day immediately preceding the redemption date or (iii) the business day immediately preceding the Maturity Date. In addition, if a holder exercises its right to convert on or prior to September 19, 2019, such holder will
receive an early conversion payment, in cash, per $1,000 principal amount as follows:
|
|
|
|
|
Early Conversion Date
|
|
Early Conversion Payment
|
|
September 20, 2018 through November 30, 2018
|
|
$
|
80.00
|
|
December 1, 2018 through May 31, 2019
|
|
$
|
64.22
|
|
June 1, 2019 through September 19, 2019
|
|
$
|
24.22
|
|
2