Forum Energy launches exchange offer for 6¼% notes due 2021

Chicago, July 6 – Forum Energy Technologies Inc. announced that it has started an exchange and consent solicitation for its 6¼% senior notes due 2021, according to a press release.

The existing notes would be exchangeable for 9% convertible secured notes due 2025. Of the 9% interest rate, 6¼% will be payable in cash and 2¾% will be in cash or additional notes, at the company’s option.

The new notes will be secured by a first lien on substantially all of the company’s assets, except for revolving credit facility collateral, which will secure the new notes on a second-lien basis. The existing notes will remain unsecured.

Investors who participate in the exchange will receive $1,000 principal amount of notes for each $1,000 principal amount of notes tendered.

Noteholders who tender by the tender deadline will also receive a pro rata portion of a total payment of $3.5 million in cash.

The early deadline for tenders is by 5 p.m. ET on July 17.

Noteholders who tender after July 17 will not receive any cash fee and will only receive $950 of new notes per $1,000 of existing notes.

The exchange offer will expire on July 31.

The company will also pay a retail broker’s fee of $2.50 in cash per $1,000 principal amount of tendered notes, subject to a cap of $1,000 in cash per investor and subject to completion of the required documentation.

Consents

Holders who participate in the exchange will also be giving their consents to eliminate certain restrictive covenants and events of default in the existing notes.

Minimum participation

The exchange offer is conditioned upon at least 95% minimum participation. Noteholders of approximately $217 million principal amount, or 66.14%, of the company’s $328 million of the existing 6¼% notes have agreed to support the exchange offer.

Any notes remaining outstanding after the exchange offer will be subordinated to the new notes with respect to substantially all the assets of the company.

Additionally, the covenants of the existing notes will be eliminated upon the receipt of the necessary majority consents.

Mandatory conversion

A portion of the new notes equal to $150 million principal amount (or 46% of the new notes minimum aggregate principal amount, subject to certain adjustments) will be mandatorily convertible into common stock on a pro rata basis at a conversion price of $1.35 per share.

The conversion is subject, however, to the condition that the average of the daily trading prices for the common stock over the preceding 20-trading day period is at least $1.50 per share. The conversion price of $1.35 per share represents a premium of 178.4% to the closing price of the company’s common stock on July 2, 2020. Investors in the new notes will also have optional conversion rights in the event that the company elects to redeem the new notes in cash and at the final maturity of the new notes. The conversion of the new notes into more than 20% of the company’s common stock will require shareholder approval. A failure to obtain such approval by June 30, 2021 will constitute an event of default under the new notes.

Managers and agents

BofA Securities Inc. (980 383 3646, debt_advisory@bofa.com), Wells Fargo Securities, LLC, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are the dealer managers for the exchange offer.

D.F. King & Co., Inc is the information agent and exchange agent (866 864-7961, 212 269-5550, forum@dfking.com, www.dfking.com/forum).

Houston-based Forum Energy makes oilfield products and provides aftermarket technical services in the oil and natural gas industry.

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