Rex Energy offers new notes, stock in exchange for 8 7/8%, 6¼% notes

By Angela McDaniels

Tacoma, Wash., Feb. 3 – Rex Energy Corp. began an exchange offer and consent solicitation for its $350 million outstanding 8 7/8% senior notes due 2020 and $325 million outstanding 6¼% senior notes due 2022, according to a company news release.

The company is offering to exchange any and all of the existing notes held by eligible holders for up to $480 million aggregate principal amount of the company’s new 10% senior secured second-lien notes due 2020 and 10,125,000 shares of the company’s common stock.

Concurrently with the exchange offer, the company is soliciting consents from eligible holders to proposed amendments to the indentures governing the existing notes that would eliminate or modify some restrictive covenants and modify some defined terms.

No consideration is being paid to holders of existing notes in connection with the consent solicitation.

The exchange offer and consent solicitation will expire at 9 a.m. ET on March 3.

In order to be eligible to receive the total exchange amount, including the early tender premium, eligible holders must tender their notes prior to 5 p.m. ET on Feb. 17, the early tender deadline.

In exchange for each $1,000 principal amount of the 8 7/8% notes tendered by the early tender deadline, eligible holders will receive the total exchange consideration, which consists of $740 principal amount of the new notes and 15 shares of common stock.

In exchange for each $1,000 principal amount of the 6¼% notes tendered by the early tender deadline, eligible holders will receive the total exchange consideration, which consists of $640 principal amount of the new notes and 15 shares.

The total exchange consideration includes the early tender premium, which consists of $50 principal amount of the new notes (the “early tender premium”).

For each $1,000 principal amount of notes tendered after the early tender deadline but at or before the expiration time, eligible holders will receive only the applicable exchange consideration, which is equal to the applicable total exchange consideration less the early tender premium.

In addition to the new notes, the company will pay accrued interest on existing notes accepted in the exchange offer up to but excluding the settlement date. The amount of accrued interest will be paid in the form of an equal principal amount of new notes.

The first three semiannual interest payments on the new notes can be made at the company’s option in whole or in part as a payment in kind with any such in-kind payments circulated at a 12% annual interest rate.

The new notes will be initially secured by second-priority liens on substantially all of the company’s and any subsidiary guarantors’ assets. The liens securing the new notes and the related subsidiary guarantees will be contractually subordinated to the liens on such assets securing the company’s revolving credit facility and certain hedging and bank product obligations permitted thereunder, to the extent of the value of the collateral securing such debt, pursuant to the terms of an intercreditor agreement.

Any 8 7/8% notes or 6¼% notes that remain outstanding following the exchange offer will be effectively subordinated to the new notes as well as the obligations under the senior credit facility and any other secured debt.

The exchange offer and consent solicitation is only made to holders who are “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 or outside the United States and persons other than “U.S. persons” as defined in Rule 902 under the Securities Act.

The information agent is D.F. King & Co., Inc. (866 387-9392, 212 269-5550 or www.dfking.com/rexx).

Based in State College, Pa., Rex Energy is an oil and gas exploration and production company.

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