Milagro Oil begins private exchange offer, consent bid for 10½% notes

By Susanna Moon

Chicago, May 20 - Milagro Oil & Gas, Inc., Vanquish Energy, LLC and Vanquish Finance, Inc. began a private exchange offer and consent solicitation for Milagro's outstanding $250 million 10½% senior secured second-lien notes due 2016.

In exchange, the companies are offering class A units and new 10½% senior secured second-lien notes due 2017 or cash for up to a maximum of $65 million principal amount of the old notes, according to a press release by Milagro.

Milagro said it will transfer substantially all of its assets to Vanquish Energy, LLC, a newly formed Delaware limited liability company, in connection with the exchange offer.

The total purchase price will be $500 principal amount of new notes and 500 class A units or $750 in cash for each $1,000 principal amount of notes tendered for exchange by the consent deadline of 5 p.m. ET on May 31.

Holders who tender their notes for exchange after the consent date will receive $475 principal amount of new notes and 475 class A units or $700 in cash for each $1,000 of notes.

The maximum principal amount of notes that may be tendered for cash in the offer is equal to the greater of (i) $40 million and (ii) the lesser of $65 million and $40 million plus the amount by which the aggregate new capital investment exceeds $130 million multiplied by 1.33, the release noted.

The new notes will have substantially the same terms as the old notes, the company said. The coupon will be payable 50% in cash and 50% in kind.

Milagro said it also is soliciting consents to amend the notes to eliminate or waive substantially all of the restrictive covenants, release the collateral and guarantees securing the old notes, eliminate events of default and modify covenants regarding mergers and consolidations.

Holders may not tender their notes without delivering the related consents, and holders may not deliver consents without tendering their notes.

The exchange offer is conditioned on tenders of at least $237.5 million of the outstanding principal amount of the old notes and also on the company obtaining the needed consents to amend the notes.

Holders of about 66.5% of the old notes have agreed to tender their notes in the exchange offer.

The exchange offer will end at midnight ET on June 14.

Tendered notes may be withdrawn by 5 p.m. ET on May 31.

D.F. King & Co., Inc. (800 290-6427, collect 212 269-5550 or milagro@dfking.com) is the information agent.

Milagro is a Houston-based oil and gas company primarily engaged in the acquisition, exploitation, development and production of oil and natural gas reserves.

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