Paramount exchanges 99.31% of 7 7/8% notes, 100% of 8 7/8% notes

New York, Feb. 8 - Paramount Resources Ltd. said it completed its exchange offer and consent solicitation for its 7 7/8% senior notes due 2010 and 8 7/8% senior notes due 2014, exchanging $132.343 million or 99.31% of the 7 7/8% notes and $9.25 million or 100% of the 8 7/8% notes.

In exchange, the company issued $213.593 million of new 8½% senior notes due 2013 and paid $36.161 million in cash.

Successful completion of the exchange satisfies one of the conditions to the company's planned trust spin-out. A shareholders meeting to approve the spin-out will be held in March.

Conclusion of the exchange follows an amendment announced on Jan. 25 following negotiations with representatives of a noteholder committee formed in response to the offer.

At that time, the company increased the amount of cash on offer, raised the coupon on the new notes and extended the maturity date.

Paramount is now offering $138.05 per $1,000 principal amount of 7 7/8% as the cash component and $220.20 per $1,000 principal amount of 8 7/8% notes. Previously the amounts were $133.27 and $215.44, respectively.

The new notes to be issued in exchange for the existing notes will pay interest at 8.5% per year and mature on Jan. 31, 2013. Previously, Paramount was offering 8% notes due 2012.

Paramount's obligations under the notes will be secured by substantially all of the trust units held by Paramount immediately following completion of its proposed trust spin-out transaction.

In addition, on Sept. 30, 2005, if holders of more than 50% of the notes choose, they can force the interest rate to rise to 10.5% from Feb. 1, 2006 in exchange for Paramount being able to call the notes up to Jan. 31, 2006 at par.

As extended, the offer expired at 5 p.m. ET on Feb. 4.

As part of the negotiated agreement, holders of 30% of the 7 7/8% notes and 43% of the 8 7/8% notes agreed to tender their notes. Along with the notes already tendered, the securities are enough to reach the minimum tender level.

Paramount, a Calgary, Alta.-based oil and natural gas exploration, development and production company, originally announced the tender on Dec. 13, saying it intended to restructure the company by spinning off oil and gas assets in two operating areas into an income trust and said that it would also begin an offer to exchange new notes and cash for any of the 7 7/8% notes and the 8 7/8% notes and to seek noteholder consent for the restructuring transaction. It said it would seek to remove most of the restrictive covenants and events of default applicable to untendered notes remaining outstanding.

It said that the trust spin-out would be conditional on the holders of more than 50% of the principal amount of each series of notes consenting to the transaction.

Paramount said that it would not call the company's shareholders meeting for the trust spin-out unless it received the required consents from the noteholders by the consent deadline. It said that the exchange offer would not be conditional upon completion of the trust spin-out.

UBS Investment Bank is dealer manager in connection with the exchange offer (call the Liability Management Group at 203 719-4210). Global Bondholder Services Corp. is the information agent for the offer (call 212 430-3774).

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