Infinity Energy makes senior secured notes convertible, moves ups maturity

By Angela McDaniels

Seattle, Oct. 3 - Infinity Energy Resources, Inc. amended the terms of its senior secured notes on Monday in order to provide the company with additional time to explore strategic financing alternatives, according to a company news release.

The company has issued the notes in several tranches since January 2005 with maturities ranging from 42 months to 48 months. The notes accrue interest at Libor plus 675 basis points.

The amendments to the notes provide for, among other things:

• A final maturity date for all remaining notes of Jan. 15, 2007 instead of payments of $2 million per month in cash or stock for nine of the next ten months and $9 million in cash on each of Jan. 15, April 15, 2007 and July 15, 2007;

• An increase in the outstanding principal notes balance by 20% or, $9 million, plus an additional $1.4 million equal to the interest that would have been due on Monday for a total of $55.4 million;

• Provisions for conversion of the notes into common stock prior to maturity at the election of the noteholders. The company will allow conversion of up to roughly $3.4 million of the notes through the end of October (the $3.4 million includes October interest expense on all of the notes); up to $2 million of additional notes plus accrued interest beginning Nov. 1 and up to an additional $2 million of notes plus accrued interest beginning Dec. 1.

"The amended terms of the notes facility should provide the company with the ability to either refinance the notes or to repay the notes assuming the sale of consolidated and/or non-core assets, or both," chief executive Stanton E. Ross said in the release.

"At a time when we will be reporting record quarterly oil and gas production and record quarterly oilfield service revenue for the third quarter of 2006, we are unfortunately not in a position to resume drilling; however, we look forward to drilling again when additional financing becomes available and as commodity prices improve," Ross said.

Infinity has retained Capital One Southcoast, Inc. as its financial adviser to help the company explore strategic alternatives to increase shareholder value, including the possible sale of all or part of the company. Infinity has received recent expressions of interest by potential acquiring firms, according to the release.

Potential transactions to increase shareholder value may include all or part of the company's approximately 162,000 net developed and undeveloped acres in Texas, Colorado and Wyoming; oilfield services subsidiary Consolidated Oil Well Services, Inc. or the company's 1.4 million-acre prospect in two concessions in the Caribbean Sea off of Nicaragua.

The previously announced evaluation of the potential sale of Consolidated Oil Well Services, the exploration of strategic alternatives for the Nicaraguan prospect and the exploration of debt financing alternatives will continue.

The company also said it does not expect to disclose developments with respect to the exploration of strategic alternatives unless and until its board of directors has approved a definitive transaction.

Infinity is an oil and natural gas exploration company based in Denver and Chanute, Kan.

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