Nytex Energy gets approval to amend series A convertible preferreds

Amendment eliminates 9% dividend; holders to get common shares

By Jennifer Chiou

New York, Sept. 12 - Nytex Energy Holdings, Inc. announced that holders of a majority of its voting securities approved the company's plan to restructure its series A convertible preferred stock and related warrants.

The company had to receive approval from its shareholders and the holders of the warrants in order to make the changes and did so on Aug. 31.

As announced, the amendments eliminate the 9% dividend paid on the preferreds, effective June 15. As compensation for giving up their dividends, investors will be paid one common share for each $1.00 of unpaid dividends owed to them. As a result, the company will issue about 767,570 common shares.

Currently, if the company liquidates, the preferred holders are entitled to be paid $1.50 per preferred out of Nytex's available assets, plus dividends. As part of the restructuring, the base liquidation amount will be reduced to $1.00 per preferred from $1.50, which was the initial purchase price of the preferreds.

In consideration for this concession, investors will receive common stock at a rate of 0.42735 common shares for each preferred held. As a result, the company would issue about 2,463,190 common shares.

"Following the disposition of our Francis Drilling Fluids, Ltd. operations this past May, we began exploring potential options to restructure our capital structure and balance sheet," Nytex president and chief executive officer Michael Galvis said in a news release.

"The restructuring of our series A preferred stock culminates our restructuring efforts that began with the redemption of the 9% and 12% convertible debentures completed earlier this year."

The company also would be able to redeem the preferreds at $1.00 apiece and eliminate the anti-dilution provision for the preferreds, which prevents Nytex from issuing shares at prices lower than the conversion price, currently $1.00.

The release added that the restructuring results in a potential liquidation preference of roughly $2.9 million in the event of a deemed liquidation.

The Dallas energy company announced plans for the restructuring on June 29.

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