Frontera once more extends exchange offer for convertibles, warrants

By Susanna Moon

Chicago, July 22 - Frontera Resources Corp. said it again extended the exchange offer for its 10% convertible notes due May 2012, 10% convertible notes due July 2013 and some warrants.

The offer will now expire at 6 p.m. ET on Aug. 18, extended from July 21. It began on April 13.

As of 6 p.m. ET on July 21, the company had received tenders of $4,082,084.55 principal amount of the 2012 convertibles, $593,980.74 of the 2013 convertibles and 6,824,234 warrants.

At June 23, holders had tendered $5,145,084.55 of the 2012 convertibles, the same amount of 2013 convertibles and 5,468,638 warrants.

Prior to that, as of May 11, holders had tendered $3,865,000 of the 2012 convertibles, none of the 2013 convertibles and 5,468,638 warrants.

At the option of tendering noteholders, they may receive:

• 4,336.33 shares of common stock for each $1,000 principal amount of old convertibles;

• $1,000 principal amount of new 10% convertible convertibles due 2015 for each $1,000 of old convertibles; or

• A combination of stock and new convertibles.

As of March 31, there was $78,818,314 of the 2012 convertibles. These are convertible into common stock at the rate of 598.80 shares for each $1,000 principal amount, equivalent to a conversion price of $1.67 per share.

As of the same date, there was $27,918,975 of the 2013 convertibles. These are convertible into stock at a rate of 584.80 shares per $1,000 principal amount, equivalent to a conversion price of $1.71 per share.

The company's shares closed at $0.06 (Pink Sheets: FRTE) on June 23.

New convertibles

The new convertibles will be substantially similar to the old convertibles, except that they will be senior to the old convertibles.

The new securities will mature on June 30, 2015 and will be convertible into 833.33 shares per $1,000 principal amount for a conversion price of $1.20 per share.

Consent solicitation

Frontera is also soliciting consents to amend the note purchasing agreements governing the old convertibles to allow for the exchange offer and to remove most of the restrictive covenants.

The offer is conditioned on holders of at least 70% total of the old convertibles electing to receive the stock payment option.

If the 70% threshold is not met, those holders electing the stock option will instead receive new convertibles.

Holders will also receive accrued interest.

Warrants

The affected warrants were issued on Sept. 18, 2009 in a private placement of shares.

The 45,186,536 of two-year warrants and 1,355,596 of 18-month warrants allow holders to purchase shares at a price of £0.15 per share.

Frontera is offering holders of the warrants the opportunity to exchange for new warrants exercisable at a price of £0.076, or $0.117, per share, which is 90% of the average closing market price for the 20 trading days preceding the date of the exchange offer.

If all holders elect to exchange, the company said that the amount of new shares to be issuable on the exercise of the new warrants will be increased to 91,859,471, which is in the same proportion to the ratio of the original exercise price to the new exercise price.

Frontera added that the purpose of the offer is to increase its operating and financial flexibility.

Questions may be directed to Liz Williamson (713 585-3216). The depositary and exchange agent is Computershare Trust Co., NA (781 575-4154 by phone or 781 575-2420 by fax).

Frontera is an independent oil and gas exploration and production company with headquarters in Houston.

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