Norse Energy seeks approval of 5% convertible holders to restructure

By Angela McDaniels

Tacoma, Wash., May 10 - Norse Energy Corp ASA wants to restructure and needs the approval of the holders of its 5% convertible callable bonds due 2015 in order to do so.

The holders of 60.76% of the bonds have already agreed to vote to approve the restructuring, according to a notice from bond trustee Norsk Tillitsmann ASA.

Holders will vote at a meeting on May 28 in Oslo.

At least half of the bonds must be represented at the meeting, and holders of at least two-thirds of the bonds represented at the meeting must vote in favor of the proposal in order for it to pass.

Bankruptcy

U.S. subsidiaries Norse Energy Corp. USA and Norse Energy Holdings, Inc., filed for Chapter 11 bankruptcy in December, and Norse Energy skipped the interest payment due Jan. 2 on the bonds.

Norse Energy said it has faced liquidity challenges for some time. A key factor has been the continued delay in the receipt of regulatory approval for high-volume hydraulic fracturing of horizontal wells on the company's pure shale play, and the decline in natural gas prices has negatively impacted cash flow from operations.

Convertibles restructuring

Under the proposed restructuring, $6 million of the bonds would be converted into shares at a conversion price of NOK 0.25 per share and up to $9 million, less the proceeds of a rights offering exceeding $1 million, of the bonds would be converted into equity at a subscription price of NOK 0.25 per share.

The remaining bonds would be amended. The amended terms would include a waiver of interest payments from May 16 to April 1, 2014, a first-priority pledge over inter-company loans from Norse Energy to Norse Energy Holdings and an adjusted conversion price of NOK 0.30 per share. The conversion price was originally NOK 0.37.

In addition, the bondholders are asked to waive for 12 months the right to declare the bonds to be in default due to the bankruptcy proceedings of the subsidiaries and the issuer filing its 2012 annual accounts later than April 30.

Bondholder loan

The company received a $4 million debtor-in-possession loan from some of the bondholders through a single-purpose vehicle. It was used to repay the initial DIP financing provided by some of the bondholders.

As compensation for providing the loan, the company plans to allocate all of the unpaid interest under the bonds, which for the purpose of the restructuring will be fixed at $1.05 million, to the holders of the loan. The allocated interest will be converted into equity at a conversion price of NOK 0.075 per share.

Each bondholder will have the option to buy a pro rata share of the loan from the current holders of the loan at a price equal to the nominal value of the bonds.

In the resale, no bondholder will receive an allocation for a purchase price of less than the Norwegian krone equivalent of €100,000.

The application period will run through the end of the bondholder meeting on May 28. The record date for the resale will be June 3.

New convertible loan

On April 29, the company issued a NOK 7.1 million convertible loan with a 5% coupon and a nine-month tenor.

The loan ranks pari passu with the bonds and has the same security.

The conversion price is the higher of the par value of the company's shares and NOK 0.075 per share. The loan becomes convertible once the unpaid interest on the convertible bonds is converted into equity.

Other restructuring terms

Also under the restructuring

• The company will seek approval to reduce the par value of its shares to NOK 0.075 from NOK 1.20;

• The company plans to raise up to the Norwegian krone equivalent of $10 million through a public rights offering. The subscription price would be NOK 0.25 per share, and the subscription period would run from June 21 to July 5;

• A NOK 21.5 million shareholder loan will be converted into shares at a subscription price of NOK 0.25 per share; and

• Company management and employees will receive 94 million five-year warrants. Each warrant would be exercisable for one new share at a price of NOK 0.10.

The parties to the restructuring agreement have agreed that no new shares received as part of the restructuring may be sold at less than NOK 0.30 until the subscription period for the rights offering ends.

Norse Energy is an oil and gas exploration and production company based in Oslo.

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