Transmeridian Exploration extends exchange offer for 12% notes, gets needed consents

By Angela McDaniels

Tacoma, Wash., Oct. 8 - Transmeridian Exploration Inc. extended the exchange offer for its $290 million 12% senior secured notes due 2010 to 5 p.m. ET on Oct. 28 from Oct. 7, according to a company news release.

In addition, the company said the minimum participation threshold for the exchange offer has been met and enough consents have been received to amend the indenture governing the notes.

Transmeridian needed tenders for at least $222.16 million of the notes - equal to 90% of the notes outstanding excluding the $43.16 million held by United Energy Group Ltd. - and consents from holders of a majority of the notes, again excluding those held by United Energy Group.

As of 5 p.m. ET on Oct. 7, holders had tendered $243.98 million of notes. In comparison, $16.69 million of notes had been tendered and not withdrawn as of Sept. 22, and the figure was $30.15 million on Sept. 10 and $34.01 million on Aug. 22.

Holders who tender will receive $200 in cash and $800 principal amount of new 12% senior secured notes due 2010 for each $1,000 principal amount of existing notes.

On Sept. 23, the company modified the payout and removed the consent payment deadline for the consent solicitation.

Before the modification, the company was offering $101 in cash and $900 of new 12% notes. The cash amount included a $30 consent payment for notes tendered by the consent deadline, which was scheduled for 5 p.m. ET on Sept. 24.

The offer was also amended so that the collateral securing the existing notes and the new notes will be expanded to include intercompany debt, and additional modifications will be made to some restrictive covenants limiting the ability of Transmeridian and its subsidiaries to incur debt, make restricted payments, enter into transactions with affiliates and sell some assets.

Also on Sept. 23, the company said that if more than $222.16 million of notes are tendered, it will increase the cash amount paid and reduce the principal amount of new 12% notes issued.

In this case, the total cash amount payable will equal $44.43 million plus an amount equal to 101% of the principal amount of existing notes tendered in excess of $222.16 million. The total principal amount of new 12% notes issuable will be $177.73 million, regardless of the amount of existing notes tendered. The cash amount and principal amount of new notes will be allocated ratably to all holders who exchange.

The new notes will be identical to the existing notes but will not include the right to have the securities repurchased upon the closing of the transactions between Transmeridian and United Energy Group.

Once the transactions between the companies are completed, however, Transmeridian said it will offer to repurchase any existing notes not exchanged in the exchange offer. If less than all of the existing notes are repurchased in that offer, the company will apply the amount of cash not used to fully repurchase the existing notes to mandatorily redeem the new notes on a pro rata basis at par plus accrued interest.

Transmeridian will not be required to redeem the new notes unless the total principal amount of new notes to be redeemed is at least $2 million, a prior news release noted.

The exchange offer began on July 23. It was originally scheduled to expire on Aug. 21 and has been extended a number of times.

The exchange offer remains conditioned on the successful completion of United Energy's tender offer for Transmeridian's senior and junior preferred stock, which is scheduled to expire on Oct. 28.

Successful completion of the exchange offer and consent solicitation is a condition to the completion of the transactions between Transmeridian and United Energy.

Only qualified institutional buyers under Rule 144A, institutional accredited investors under Regulation D or non-U.S. persons may participate in the exchange offer.

Transmeridian Exploration is a Houston-based energy company. United Energy is an investment holding company based in Hong Kong.

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