New Issue: Encore Acquisition prices upsized $225 million seven-year deal in middle of talk to yield 11 ¼%

By Paul Deckelman

New York, Apr. 22 - Encore Acquisition Co. priced an upsized offering of $225 million seven-year senior subordinated notes on Wednesday, high yield syndicate sources said. The notes (B1/B), carrying a 9½% coupon and maturing on May 1, 2016, priced at 92.228 to yield 11 1/8%, in the middle of pre-deal market price talk envisioning a yield in a range of 11% to 11¼%.

Gross proceeds were $207.513 million and net proceeds after expenses came in at $203.013 million, versus the $200 million figure originally talked around the market.

The deal, announced earlier in the morning concurrently with the company's latest financial results, was marketed to potential investors via a mid-morning conference call and priced late in the afternoon.

The notes, which will mature in 2016, will be non-callable for the first four years after their issue, other than a make-whole call at 50 basis points over Treasuries as well as the standard three-year clawback provision allowing for the repurchase of up to 35% of the issue using equity proceeds. The indenture also includes a provision for a change-of-control put at 101% plus accrued interest.

The new deal came to market via joint book-running managers Banc of America Securities LLC and Wachovia Capital Markets, LLC, along with a number of banks serving as co-managers, including BNP Paribas Securities Corp., Calyon Securities (USA) Inc., Fortis Securities LLC, RBC Capital Markets Corp., Comerica Securities, Inc., U.S. Bancorp Investments, Inc., BBVA Securities Inc., Daiwa Securities America Inc., DnB NOR Markets, Inc., DZ Financial Markets LLC, Natixis Bleichroeder Inc., Scotia Capital (USA) Inc., RBS Securities Inc., Sun Trust Robinson Humphrey, Inc. and Wedbush Morgan Securities Inc.

The underwritten public offering is taking place under a shelf registration statement filed with the Securities and Exchange Commission.

Fort Worth, Tex.-based Encore, which acquires and develops oil and natural gas reserves in fields located in various parts of the United States, including Montana, North Dakota, Texas, New Mexico, Wyoming, Utah, Oklahoma and Louisiana, plans to use the deal proceeds to help repay outstanding borrowings under its current revolving credit facility. The company said in its prospectus for the note offering that as of the end of the first quarter on March 31, it had $353 million of outstanding borrowings and $547 million of borrowing capacity under that $900 million revolver, which matures in March of 2012, while its wholly owned Encore Energy Partners Operating LLC, had $185 million of outstanding borrowings and $55 million of available capacity under its own $240 million revolver, also maturing in 2012.

Issuer:	Encore Acquisition Co.
Amount:	$225 million (face) $207.513 million (gross proceeds)
Maturity:	May 1, 2016
Security description:	Senior subordinated notes
Bookrunners:	Banc of America Securities LLC, Wachovia Capital Markets, LLC
Co-managers:	BNP Paribas Securities Corp., Calyon Securities (USA) Inc., Fortis Securities LLC, RBC Capital Markets Corp., Comerica Securities, Inc., U.S. Bancorp Investments, Inc., BBVA Securities Inc., Daiwa Securities America Inc., DnB NOR Markets, Inc., DZ Financial Markets LLC, Natixis Bleichroeder Inc., Scotia Capital (USA) Inc., RBS Securities Inc., Sun Trust Robinson Humphrey, Inc. and Wedbush Morgan Securities Inc.
Coupon:	9½%
Price:	92.228
Yield:	11 1/8%
Spread:	864 basis points
Call protection:	Make-whole provision at Treasuries plus 50 bps until May 1, 2013, then callable at 104.75, 102.375, and at par on May 1, 2015 and after
Equity clawback	Until May 1, 2012 for up to 35% at 109.5
Trade date:	April 22
Settlement date:	April 27
Ratings:	Moody's: B1
	Standard & Poor's B
Distribution:	Off shelf
Price talk:	11% to 11¼%

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