Heritage Oil gets consents needed to amend 8% convertibles due 2012

By Angela McDaniels

Tacoma, Wash., Dec. 31 - Heritage Oil Corp. received consent from the holders of its 8% convertible bonds due 2012 to amend the terms of the convertibles, according to a news release from parent company Heritage Oil plc.

Bondholders voted on the proposals at a meeting on the Channel Island of Jersey on Dec. 31. Holders who wished to vote by proxy had until 5 a.m. ET on Dec. 29 to deliver their voting instructions.

There is $127.1 million principal amount of convertibles outstanding. Holders of $118.9 million principal amount, or 93.55%, of the outstanding convertibles voted at the meeting, and all votes were cast in favor of the proposals.

The company began the consent solicitation on Dec. 9.

Bondholders were asked to remove the restriction that prevents the parent company from making or declaring a dividend or making any other distributions to its shareholders that totals, on a consolidated basis, more than 30% of its earnings for the preceding financial year.

Heritage Oil plc has agreed to sell some interests in Uganda to Eni SpA and is considering returning some of the proceeds to shareholders through a special dividend of 75p to 100p per share. The transaction is not expected to be completed until the first quarter of 2010, so without the change, the company would be restricted from making a dividend until after the annual audited consolidated accounts for the financial year ending Dec. 31, 2010 have been published.

The company offered a consent fee of $2,000 for each $100,000 principal amount of convertibles.

The company also sought bondholder approval to delete the provisions of the convertibles that provide for an adjustment to the conversion price if the company makes any capital distribution.

Heritage Oil was originally asking bondholders to waive any adjustment to the conversion price that could otherwise arise in connection with the declaration of a dividend on or before June 30. It amended the solicitation on Dec. 23 to instead ask for the deletion of the provision. The amendment was made after an ad hoc committee of bondholders formed to discuss the solicitation.

In consideration for the deletion of the provision, bondholders will receive any dividend that is declared at the rate they would be entitled to receive had they converted their bonds into ordinary shares.

The company noted that if the distribution is paid other than in cash, the company may elect instead to pay the fair market value of the distribution.

Holders of at least 75% of the principal amount of bonds had to be present or represented at the meeting in order to reach a quorum, and the proposals needed to be approved by at least 75% of the votes cast at the meeting in order to pass.

The agent for the consent solicitation was the Bank of New York Mellon (+44 0 207 964 4958, attn: Andrew Rogers).

The ad hoc committee of bondholders was represented by law firm Weil, Gotshal & Manges LLP (LO.Heritage.Oil@weil.com or +44 207 903 13590).

Heritage Oil plc is an independent upstream oil and gas exploration and production company based in Jersey, Channel Islands.

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