Energy XXI Gulf Coast exchanges $347.5 million of 10% notes in offer

By Angela McDaniels

Tacoma, Wash., Nov. 12 - Energy XXI Gulf Coast, Inc. received tenders for $565,846,000 principal amount of its 10% senior notes due 2013 and accepted $347.5 million principal amount for exchange, according to a company news release.

Energy XXI offered newly issued 16% second-lien junior secured notes due June 15, 2014 in exchange for up to $347.5 million principal amount of the 10% notes.

The exchange offer and consent solicitation began Sept. 4 and expired at midnight ET on Nov. 11. The offer was originally scheduled to expire on Oct. 2 before being extended multiple times.

The company said it will issue $800 of new notes for each $1,000 principal amount of 10% notes, subject to proration. The payment includes a $50 premium for notes tendered by the early tender date, which was 5 p.m. ET on Sept. 18.

All of the notes accepted were tendered by the early tender date, the company noted.

Energy XXI also received enough consents from noteholders to modify some restrictive covenants in the indenture to permit the issuance of the 16% notes.

A tender of notes constituted consent in favor of the proposed amendments, and the adoption of the amendments required the consent of holders of a majority of the 10% notes.

When the offer began on Sept. 4, Energy XXI said it would issue up to $338 million of the 16% notes in the exchange offer and a concurrent private placement, which meant a maximum of $360 million of 10% notes could be accepted in the exchange offer, and that the exchange offer's cap could be lowered depending on the amount of notes to be issued in the placement.

On Sept. 21, the company announced that it had entered into a purchase agreement with some institutional investors for a private placement of $60 million principal amount of the new 16% notes and 13,224,720 shares of the common stock of ultimate parent company Energy XXI (Bermuda) Ltd., and the maximum amount of 10% notes to be accepted in the exchange offer was lowered to the current $347.5 million.

The 16% notes issued in the exchange offer are designated series A notes, and the 16% notes issued in the private placement are designated series B notes. The two series will initially bear different Cusip numbers but will otherwise have the same terms.

The 16% coupon on the new notes consists of 14% payable in cash and 2% payable in kind.

The notes are guaranteed by direct parent Energy XXI USA, Inc., Energy XXI (Bermuda) and each of the company's subsidiaries.

The settlement date for the exchange offer and the private placement was expected to be Nov. 12.

The company expects that following settlement, $276.5 million of 10% notes and $338 million of 16% notes will be outstanding.

The offer was conditioned on the receipt of tenders for at least $311 million principal amount of 10% notes, the receipt of the needed consents, the company having closed on the sale of at least $50 million of the new 16% notes in the private placement and the receipt of an amendment or waiver under its first-lien credit agreement such that the exchange offer and private placement would not be prohibited under the terms of the facility.

Energy XXI (Bermuda) is a Bermuda-based independent oil and natural gas exploration and production company. Energy XXI Gulf Coast is based in Houston.

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