New Century admits default on notes sold to Laurus Master Fund in 2005

By Devika Patel

Knoxville, Tenn., July 8 - New Century Energy Corp. reported in an 8-K filed Tuesday with the Securities and Exchange Commission that it is in default on a secured convertible term note and a secured term note, which were issued to Laurus Master Fund, Ltd.

The convertible note was issued on June 30, 2005 for $15 million and there was $12 million of the note's principal outstanding as of March 31.

The term note was issued on Sept. 19, 2005 for $9.5 million and there was approximately $6.35 million of its principal outstanding as of March 31.

The company failed to pay the amounts it owed on both series of notes in June and, consequently, it was in default and had three days to remedy the default, which it failed to do by the deadline of July 3.

On July 7, Laurus notified the company of the defaults and that the notes began to accrue interest at the default rate, an additional 30%, on July 3.

Laurus also agreed to forbear from exercising its rights and remedies under the notes agreements (other than the increased interest rates and requiring that the company pay default payments) until 5 p.m. ET on July 18.

The company said in the filing that it is actively seeking alternative financing and is in negotiations with Laurus trying to eke out a separate forbearance agreement, which might keep Laurus from exercising its rights under the default until the company is able to remedy the default.

New Century said, however, that it can provide no assurances that it will have sufficient funds to repay the amounts due.

If the company is unable to obtain alternative financing, it could be forced to abandon its current business activities and sell or transfer a substantial portion of its assets to Laurus. Laurus could take control of substantially all of the company's assets or the company could be forced to declare bankruptcy.

Houston-based New Century is an oil and natural gas exploration and development company.

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