American Energy extends tender offers, says minimum condition met

By Marisa Wong

Los Angeles, Oct. 3 – American Energy – Permian Basin, LLC announced that it has satisfied the minimum tender condition of its previously announced offers to purchase any and all of the 13% senior secured first-lien notes due 2020, 8% senior secured second-lien notes due 2020, floating-rate senior notes due 2019, 7 1/8% senior notes due 2020 and 7 3/8% senior notes due 2021, each issued by American Energy and its wholly owned subsidiary, AEPB Finance Corp., as co-issuer.

As of 11:59 p.m. ET on Oct. 2, the early participation deadline, holders had tendered $460 million, or 100%, of the outstanding first-lien notes; $291,652,000, or 100%, of the outstanding second-lien notes; $218.38 million, or 95.21%, of the floaters due 2019; $565,883,000, or 95.43%, of the 2020 senior notes; and $517,031,000, or 98.28%, of the 2021 senior notes.

The minimum tender condition has been met, given than more than 95% of each series of notes has been tendered.

The company also announced on Thursday that it has decided to extend the expiration time of the offers in order to satisfy the remaining conditions to the previously announced out-of-court restructuring.

The expiration time is now 5 p.m. ET on Oct. 11, extended from 11:59 p.m. ET on Oct. 2.

Restructuring support

As announced on Aug. 29, American Energy entered into an agreement to implement a comprehensive financial restructuring plan under a restructuring support agreement with a group of noteholders.

The consenting noteholders collectively hold, as of Aug. 28, about $374.37 million, or 81%, of the outstanding amount of first-lien notes; $250.99 million, or 86%, of the outstanding amount of second-lien notes; and $1.19 billion, or 88%, of the outstanding amount of unsecured notes, namely the floating-rate notes due 2019, senior notes due 2020 and senior notes due 2021.

Under the RSA, the consenting noteholders agreed to support the out-of-court restructuring and, alternatively, the transactions under the pre-packaged plan, according to a prior press release.

The consenting noteholders had, among other things, agreed to (i) tender all of their unsecured notes in the unsecured notes tender offers; (ii) tender all of their first-lien notes and second-lien notes in the secured notes tender offers; (iii) consent to the proposed amendments in the consent solicitations and not withdraw or revoke their consents; (iv) vote their respective notes to accept the pre-packaged plan and not withdraw or revoke their votes; and (v) support the confirmation and consummation of the pre-packaged plan.

The out-of-court restructuring, if implemented, would result in a consensual refinancing or elimination of the company’s debt that would, among other things, increase liquidity and significantly reduce the company’s debt obligations and interest expense by extinguishing up to roughly $2.1 billion of debt through the repurchase of that debt for a combination of cash and warrants.

Prior to the settlement of the tender offers, the issuers will carry out a private placement of about $681 million of new senior secured notes for cash consideration of at least 89.25% of the principal amount. Proceeds will be used, along with borrowings under a new senior secured reserve-based lending facility, a cash contribution and existing cash, to complete the restructuring transactions.

Some parties have committed to purchase up to $681 million of new secured notes; this commitment is valid until Dec. 27.

Unsecured notes

Under the out-of-court restructuring, American Energy is offering noteholders who tender their unsecured notes prior to the early participation deadline, originally 5 p.m. ET on Sept. 20, a tender offer consideration, and Sable Permian Resources, LLC is offering to fund the unsecured early participation payment.

Specifically, American Energy is offering for each $1,000 principal amount of tendered notes one warrant and $100 in cash. The warrants entitle holders to purchase in aggregate up to 8.5% of the company’s common units pro forma for the out-of-court restructuring representing limited liability company interests in the company at an exercise price equal to $0.0001.

Sable Permian is funding $50 in cash for each $1,000 principal amount of notes tendered by the early participation date.

Noteholders who tender their notes after the early deadline and prior to the expiration time, originally 5 p.m. ET on Sept. 27, will not be eligible to receive the early participation payment funded by Sable Permian and will only receive the tender offer consideration.

No consideration is being paid for accrued interest.

Holders tendering notes must also provide consents in the applicable consent solicitation.

Secured notes

American Energy is offering to holders who tender their secured notes by the early participation deadline a tender offer consideration of $950 in cash for each $1,000 principal amount of notes plus 100% of accrued interest to the settlement date.

Sable Permian is offering an early participation payment of $50 in cash for each $1,000 of notes tendered by the early deadline.

Holders who tender their notes after the early deadline and prior to the expiration time will only receive the tender offer consideration of $950 per $1,000 principal amount and accrued interest.

Holders tendering first- or second-lien notes must also deliver consents in the applicable consent solicitation.

Consent solicitations

In connection with the tender offers, the issuers are soliciting consents to some proposed amendments to the indentures governing the notes.

The proposed amendments would eliminate substantially all restrictive covenants, some events of default applicable to the notes and some other provisions contained in the indentures governing the notes. The amendments would also release the liens on all of the collateral securing the first-lien and second-lien notes.

Conditions

Completion of the out-of-court restructuring is subject to a number of conditions, including that (i) at least 95% of the aggregate principal amount of each series of notes are tendered in the tender offers; (ii) the issuers complete the private placement and (iii) the borrowing base under the new RBL facility is at least $700 million on the settlement date.

The company and some of its affiliates are also soliciting votes on a pre-packaged plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code from noteholders.

In the event the minimum tender condition is not satisfied or waived, or if the out-of-court restructuring is otherwise not completed but, (i) with respect to each class of notes, holders constituting more than one-half in number of that class who have validly voted on the plan and holding at least two-thirds of the aggregate principal amount of the outstanding notes in that class have voted to accept the pre-packaged plan by submitting ballots on or before the tender offer expiration time, which is also the voting deadline, and (ii) Sable Permian has received sufficient funding to make the cash contribution and early participation payments, American Energy will seek to confirm the pre-packaged plan and complete the related transactions.

Regardless of whether the company completes the out-of-court restructuring or the in-court reorganization, all noteholders who tender their notes under the tender offers prior to the early participation deadline and thereby consent to the proposed amendments will receive from Sable Permian the early participation payment upon completion of a restructuring.

The company noted that the pre-packaged plan does not provide for any consideration to noteholders besides the tender offer consideration.

RBL facility

Subject to the conditions of the out-of-court restructuring or in-court reorganization, as applicable, Sable Permian will contribute its assets to American Energy, and American Energy will contribute the Sable Permian assets and all of its oil and gas properties to AEPB Acquisition Co., LLC. Sable Permian will contribute $375 million in cash in exchange for common equity in American Energy.

Contemporaneously with the completion of a restructuring, and as a condition of either restructuring, AEPB Acquisition will enter into a new senior secured reserve-based lending facility with commercial lenders engaged in lending in the oil and gas industry.

JPMorgan Chase Bank, NA had agreed under a commitment letter provided to Sable Permian to provide 100% of the RBL facility.

The note issuers expect to use borrowings under the new facility, along with proceeds of the cash contribution, to repay all outstanding borrowings under and terminate Sable Permian’s and AEPB Acquisition’s existing revolvers with JPMorgan, respectively, and to fund a portion of the cash consideration paid in the tender offers.

The company said it intends to continue to operate its business in the normal course without material disruption to its vendors, partners or employees until the effective date of a restructuring.

Prime Clerk LLC (844 627-8453, 929 602-1722 or aepbballots@primeclerk.com) is acting as the tender agent and information agent for the tender offers and voting agent for the solicitation of votes on the pre-packaged plan.

American Energy – Permian Basin, formerly known as Sable Permian Resources Land, LLC, is an independent oil and natural gas company based in Houston.

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