Frontera Resources announces exchange offer for 10% convertibles

By Angela McDaniels

Tacoma, Wash., July 18 - Frontera Resources Corp. said it received shareholder consent to proceed with an exchange offer for its $89,175,688 of 10% convertible notes due 2012 and $31,587,757 of 10% convertible notes due 2013.

The exchange offer is part of a larger series of transactions that includes the effective redomicile of the company, a Delaware corporation, through a merger with Frontera Resources Corp., a Cayman Islands exempted company. Frontera Cayman will be the surviving company.

For each $1,000 principal amount of convertibles, Frontera Delaware is offering:

• 15,417 ordinary shares issued by Frontera Cayman. This is equivalent to a conversion price of $0.065 per share;

• $1,000 principal amount of new 10% convertible notes due 2016 issued by Frontera Resources Holdings, LLC; or

• A combination of the stock payment and new convertibles.

Holders will also receive accrued interest up to but excluding the settlement date. It will be paid in cash, stock or a combination at the election of each holder.

The conversion price of the new convertibles will be $0.25 per share. The conversion price is $1.67 for the convertibles due 2012 and $1.71 for the convertibles due 2013.

Interest on the new convertibles will be payable in cash or in kind at the company's option.

The new notes will be automatically converted into shares if the closing price of the company's shares on the Alternative Investment Market of the London Stock Exchange exceeds 200% of the conversion price for at least 20 consecutive trading days.

The note purchase agreements under which the old convertibles were issued prohibits the company from repurchasing the old convertibles in exchange for shares. Therefore, Frontera Delaware is soliciting consents to amend the agreement to allow it to exchange the convertibles for shares.

It is also soliciting consents to amend the agreements to allow it to report its financial results on a semiannual rather than quarterly basis and eliminate most of the negative covenants. All of the negative covenants, with some revisions, are included in the note purchase agreement under which the new convertibles will be issued.

Holders who tender will be deemed to have granted consents. Holders can consent to the amendments without tendering their convertibles.

The exchange offer began on June 28 and will end at 6 p.m. ET on July 26.

In order for the offer to be completed, at least 75% of the old convertibles must be tendered in exchange for the stock payment. The company said the holders of $91,115,696 principal amount, or 75.4%, of the outstanding convertibles plan to tender their convertibles in exchange for stock and to grant their consents.

The exchange offer is also conditioned on the completion of the merger.

The convertibles due 2012 and convertibles due 2013 were issued in private placements in May 2007 and July 2008, respectively.

The depositary for the exchange offer is Computershare Trust Co., NA (781 575-4154). Noteholders with questions can contact Frontera Resources at 713 585-3200.

Frontera is a Houston-based oil and gas exploration and production company. The merged company will have its principal offices in Houston and Tbilisi, Georgia.

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