Compton Petroleum's recapitalization plans gets 7 5/8% noteholder OK

By Angela McDaniels

Tacoma, Wash., Sept. 14 - Compton Petroleum Corp. said the required majority of holders of its $450 million 7 5/8% senior notes due 2013 approved the recapitalization of those notes.

The recapitalization plan required the approval of two-thirds of the votes cast by holders of the notes present at a meeting on Sept. 14. Each noteholder had one vote for each $1 principal amount of notes.

The recapitalization remains subject to bank and court approval, according to a company news release.

Compton anticipates formally applying for court approval of the recapitalization on or about Sept. 17 and that the recapitalization will be completed on or about Oct. 18.

The company entered into support agreements with an informal ad hoc committee of noteholders as part of the transaction.

Under the recapitalization, the 7 5/8% notes will be exchanged for a combination of $238.5 million of 10% senior notes due 2017, subject to a further note exchange as described below, and $184.5 million of cash.

For each $1,000 of principal amount of notes held, holders who chose Election A will receive approximately $940 of new 10% senior notes due 2017 issued by Compton Petroleum Finance Corp. once the recapitalization is completed. Those who chose Election B will receive approximately $537.73 of cash and $402.27 of new notes.

As a condition to the completion of the recapitalization, Compton agreed with the ad hoc committee of noteholders to concurrently issue to them $45 million of 10% senior mandatory convertible notes due September 2011 issued by Compton Petroleum Finance in exchange for $45 million of the new 10% notes and to pay to those noteholders a placement fee of $3.7 million in connection with that exchange. This exchange reduces the principal amount of the new 10% notes to $193.5 million.

Recapitalization plan

The company's recapitalization plan includes a proposed plan of arrangement under the Canada Business Corporations Act.

Compton said that upon completion of the recapitalization:

• The company will have rebalanced its consolidated capital structure by reducing the total amount of debt outstanding to C$380 million (excluding the $45 million mandatory convertibles) from C$616 million;

• The senior bank facility will be increased to C$225 million, comprised of a C$210 million revolving term facility and a C$15 million revolving working capital facility, and two new members were added to the syndicate;

• The bank facility's terms will be changed such that, if not extended at the lenders' option in 2011, the undrawn portion will be canceled and the amount outstanding will convert to a 365-day non-revolving term facility;

• The interest margins on the bank facility will be reduced by 50 basis points; and

• The annual cash interest cost of Compton's consolidated outstanding debt will be reduced by approximately C$11 million.

The information agent for the exchange offer is Mackenzie Partners, Inc. (212 929-5500, 800 322-2885 or tenderoffer@mackenziepartners.com).

Compton is an oil and gas exploration and production company based in Calgary, Alta.

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