Gran Tierra begins exchange offers, consent bids for 2025, 2027 notes

By Marisa Wong

Los Angeles, Sept. 19 – Gran Tierra Energy Inc. has begun offers to exchange any and all of the outstanding notes under two series for new 9½% senior secured amortizing notes due 2029, according to a press release.

Gran Tierra is offering to exchange any and all of the following existing series:

• $271,909,000 outstanding 6¼% senior notes due 2025 issued by Gran Tierra Energy International Holdings Ltd. on Feb. 15, 2018 (Cusip: 38502HAA3, G4066TAA0); and

• $300 million outstanding 7¾% senior notes due 2027 issued by Gran Tierra on May 23, 2019 (Cusip: 38502JAA9, U37016AA7).

Consent solicitation

Simultaneously with the exchange offers, the issuers are soliciting consents to some proposed amendments to the indentures governing their respective notes.

The proposed amendments would provide for, among other things, the elimination of substantially all of the restrictive covenants and events of default and related provisions with respect to the applicable series of existing notes and the amendment of some defined terms and covenants in the existing indentures.

The proposals are also expected to release the guarantees of the existing notes.

Considerations

Holders who tender their notes and deliver consents by the early participation deadline are eligible to receive for each $1,000 principal amount of 2025 notes, $1,080, a portion of which will be payable in cash and the remainder will be payable in principal amount of new notes; and for each $1,000 principal amount of 2027 notes, $1,020 principal amount of new notes.

The total considerations include an early participation premium of $80 for each $1,000 of 2025 notes and an early participation premium of $70 for each $1,000 of 2027 notes.

The aggregate cash consideration payable as part of the 2025 notes’ total consideration, which includes the early participation premium, is equal to $60 million. The pro rata portion of the $60 million cash consideration for each $1,000 aggregate principal amount of 2025 notes tendered by the early participation deadline and accepted for exchange will be determined at the early participation deadline, based on the aggregate amount of 2025 notes tendered by that early deadline. The company noted that this means the greater the amount of 2025 notes tendered, the lower the pro rata portion of the $60 million cash consideration per $1,000 of 2025 notes tendered.

Holders tendering notes and delivering consents after the early participation deadline will be eligible to receive the exchange consideration of $1,000 of new notes for each $1,000 of 2025 notes tendered and $950 of new notes for each $1,000 of 2027 notes tendered.

In addition, holders will receive accrued interest to but excluding the settlement date.

Timeline and details

The early participation deadline is at 5 p.m. ET on Oct. 2, which is also the withdrawal deadline.

The expiration deadline is at 11:59 p.m. ET on Oct. 18.

Settlement is expected to be on Oct. 20.

The exchange offers and consent solicitations are conditioned on, among other things, holders of at least 50% of each series of notes delivering consents.

Each exchange offer and solicitation is a separate offer, and each exchange offer and solicitation may be individually amended, extended, terminated or withdrawn without amending, extending, terminating or withdrawing any other exchange offer or solicitation, provided that each exchange offer is subject to the satisfaction of the minimum exchange condition.

The company will not receive any cash proceeds from the issuance of the new notes in the exchange offers. Existing notes surrendered and accepted for exchange will be canceled.

Only holders who are qualified institutional buyers under Rule 144A and non-U.S. persons under Regulation S are eligible to participate in the exchange offers and consent solicitations.

The company said it expects to draw $50 million under its amended and restated senior secured credit facility dated Aug. 18, 2022 with Trafigura PTE Ltd. as a lender to finance a portion of the cash consideration for the exchange of the 2025 notes tendered on or prior to the early participation deadline and to fund the remainder of the cash consideration with cash on hand.

On Sept. 19, in connection with the exchange offers, the company amended and restated that credit facility to, among other things, adjust the initial commitment of $100 million to $50 million (maintaining the potential option of up to an additional $50 million) and extend the availability period until Dec. 31. The repayment of the credit facility will continue to be made by way of deductions of the price payable by Trafigura for the crude oil delivered under commercial oil marketing contracts. As of June 30, after giving effect to the amendment, the credit facility was undrawn.

The information agent and exchange agent is D.F. King & Co., Inc. (800 859-8509 or 212 269-5550 for banks and brokers; gte@dfking.com).

Gran Tierra is an oil and natural gas exploration and production company based in Calgary, Alta.

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