Denbury launches exchange offers for subordinated, second-lien notes

By Sarah Lizee

Olympia, Wash., June 3 – Denbury Resources Inc. announced exchange offers to eligible holders of its $203,545,000 of 6⅜% senior subordinated notes due 2021 and $314,662,000 of 5½% senior subordinated notes due 2022 and a separate exchange offer to holders of its $450 million of 7½% senior secured second-lien notes due 2024.

For each $1,000 principal amount of old notes validly tendered and not validly withdrawn prior to the early participation time of 5 p.m. ET on June 14, holders will be eligible to receive the following total consideration amounts:

• For the 6⅜ subordinated notes, $400 of cash, $350 principal amount of new second-lien notes and $250 principal amount of new convertible senior notes, which includes an early participation premium of $50 in cash;

• For the 5½% subordinated notes, $225 of cash, $225 principal amount of new second-lien notes and $550 principal amount of new convertible senior notes, which includes an early participation premium of $50 in cash;

• For the 7½% second-lien notes, $1,000 of new second-lien notes, which includes an early participation premium of $50 principal amount of new notes.

Old notes tendered pursuant to the exchange offers after the early participation time will not be eligible to receive the early participation premium.

Holders will also receive accrued interest to the settlement date.

The new notes are comprised of 7¾% senior secured second-lien notes due Feb. 15, 2024 and 6⅜% convertible senior notes due Dec. 31, 2024.

The maximum amount of consideration of each type that the company will pay or issue in the subordinated notes exchange offers is limited to $71.5 million in cash, $71.3 million in new second-lien notes and $98.9 million in new convertibles.

If the subordinated notes exchange offers are oversubscribed prior to the early participation time, all 2021 notes will be accepted before any 2022 notes are accepted, and all 2022 notes will be accepted on a pro rata basis until the applicable maximum consideration threshold is met.

However, all old subordinated notes tendered before the early participation time will be accepted before any old subordinated notes tendered after the early participation time are accepted. Based on the foregoing, 2021 notes tendered before the early participation time will not be subject to proration, the company said.

Under the private exchange agreements, some institutional investors have agreed to exchange about $44.8 million of the company’s 6⅜% senior subordinated notes due 2021, $93.1 million of 5½% senior subordinated notes due 2022 and $96.3 million of 4⅝% senior subordinated notes due 2023 for about $48.5 million of cash, $36.6 million of new 7¾% senior secured second-lien notes due 2024 and $149.1 million of new 6⅜% convertible senior notes due 2024.

Additionally, the same institutional investors have agreed to exchange $168 million of 7½% senior secured second-lien notes due 2024 for $168 million of new second-lien notes.

The consideration offered under the private exchange agreements is the same as the consideration being offered in the exchange offers, the company said.

Under both the subordinated notes exchange offers and separate private exchanges, the company will pay or issue up to $120 million of cash, $107.9 million of new second-lien notes and $248 million of new convertibles.

Under both the exchange offers and private exchanges, the company will issue up to $557.9 million of new second-lien notes. All new second-lien notes, whether issued in the private exchanges or the exchange offers, will be part of the same series and be fungible.

Terms of the new second-lien notes will be the same as the old ones, except holders of the new notes may require the company to repurchase their notes at a price of par if any old notes remain outstanding on Nov. 15, 2023.

The new convertibles will be convertible into the company’s common stock at any time, at the option of each holder, at a rate of 370 shares of common stock per $1,000 principal amount of convertible notes, resulting in an issue price of $2.70 per share.

In addition, the new convertible senior notes will automatically convert at that same rate if the volume-weighted average price of the company’s common stock is at or above $2.43 per share for 10 out of 15 consecutive trading days. The maximum number of shares subject to the new convertibles would be about 92 million.

Tenders may be validly withdrawn at any time prior to the early participation time.

The exchange offers are conditioned on a minimum of $300 million of new second-lien notes and $200 million of new convertibles being issued.

The initial settlement date is expected for June 19.

The exchange offers will expire at 11:59 p.m. ET on June 28.

The final settlement date, if necessary, is currently expected to occur on or about July 2.

D.F. King & Co., Inc. (800 399-1581 toll free, 212 269-5550 banks and brokers or denbury@dfking.com) is the exchange agent and information agent.

Denbury is a Plano, Texas oil and natural gas company.

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