Frontera Energy collects consents to add ‘flexibility’ to 9.7% notes

By Susanna Moon

Chicago, Nov. 26 – Frontera Energy Corp. said it secured the needed consents to amend its $350 million 9.7% senior notes due 2023 in the solicitation that ended at 5 p.m. ET on Nov. 23.

Frontera received consents from holders of 91.16% of the outstanding notes, above the required majority threshold, according to a company update on Monday.

“With the enhanced capital allocation flexibility it gives the company, this consent opens new avenues for the board to increase value for Frontera shareholders,” Gabriel de Alba, chairman of the board of directors, said in the press release.

“While continuing to make disciplined decisions and taking actions to close the stock’s valuation gap, we can now move forward with evaluating additional strategic initiatives designed to enhance shareholder returns, with the full support of our bondholders.”

The company began the solicitation Nov. 13 after saying on Nov. 12 that it planned to seek consents to amend the notes for flexibility to use cash resources “to implement measures expected to enhance shareholder value.”

Specifically, the company was looking to amend the limitations on restricted payments in the indenture to replace a basket permitting restricted payments of up to $40 million with a new basket allowing payments of up to $100 million per year, on a cumulative basis and to add a new basket allowing restricted payments for proceeds from the sale of unrestricted subsidiaries, subject to meeting financial ratio tests, according to a previous announcement.

On Nov. 20 the company extended the consent solicitation from 5 p.m. ET on Nov. 20 and amended the consent fee to be a fixed amount of $20 per $1,000 principal amount from an aggregate amount of $3.5 million to be distributed pro rata to consenting noteholders.

The consent fee is expected to be paid to consenting holders on Nov. 28.

The proposed amendments are in addition to other existing provisions allowing the company to make additional restricted payments in various circumstances, including a provision related to its consolidated net income.

The measures expected to enhance shareholder value include accelerating or increasing share buyback programs, dividend payments and investments, the company had added.

Holders needed to be of record as of 5 p.m. ET on Nov. 12.

Citigroup Global Markets Inc. (800 558-3745), HSBC Securities (USA) Inc. (888 472-2456) and Itau BBA USA Securities, Inc. (888 770-4828) are the solicitation agents. The depositary and information agent is Global Bondholder Services Corp. (866 807-2200).

Frontera is a Toronto-based explorer and producer of crude oil and natural gas.

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