Forbes Energy Services begins consent solicitation for 11% notes

By Angela McDaniels

Tacoma, Wash., Jan. 22 - Forbes Energy Services Ltd. is soliciting consents from the holders of the $205 million of 11% senior secured notes due 2015 issued by two of its subsidiaries, Forbes Energy Services LLC and Forbes Energy Capital Inc.

The company is looking to amend the indenture governing the notes and needs consents from holders of a majority of the outstanding notes not owned by the company or its affiliates.

Rather than a consent fee, the company is offering additional amendments that it said would provide additional rights and benefits to the noteholders.

The consent solicitation will expire at 4:30 p.m. ET on Feb. 4.

The amendment will allow the company to remain in compliance with the capital expenditure covenant in the indenture for fiscal year 2008 and will allow it to make capital expenditures in subsequent years in amounts that are "consistent with its long-term business plan, prior planning and capital expenditure budgeting," according to a company news release.

More specifically, the amendment will change the definition of net income to provide for the exclusion of some non-cash charges that, according to Forbes Energy Services, do not negatively impact the company's current cash flow or are extraordinary, unusual or non-recurring non-cash charges, but that have had and may have the effect of restricting the company's ability to make capital expenditures under the indenture.

The company expects to have a net loss for 2008 that is lower than expected "net income" as defined in the indenture and attributed this to (a) non-cash charges related to deferred taxes resulting from its change in tax status in conjunction with its reorganization in 2008 and to (b) impairment writedowns or writeoffs of long-lived assets for the fourth quarter primarily due to the depressed and volatile energy market environment and the related decline in the company's market capitalization.

Jefferies & Co. (203 708-5831) is the solicitation agent, and Wells Fargo Bank, NA (612 667-6245) is tabulation agent.

Forbes Energy Services is an Alice, Texas-based independent oilfield services company that provides drilling and production-related services to oil and natural gas companies.

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