Energy XXI Gulf Coast offers to swap up to $360 million 10% notes for new 16% notes, seeks consents

By Susanna Moon

Chicago, Sept. 4 - Energy XXI Gulf Coast, Inc. said it began an exchange offer and consent solicitation for its 10% senior notes due 2013.

In the offer, the company will exchange up to $360 million principal amount of outstanding senior notes tendered for its newly issued 16% second-lien junior secured notes due June 15, 2014. The amount of notes accepted in the offer could be prorated or reduced to $311 million principal amount of senior notes, depending on the amount of second-lien notes sold in a concurrent private placement.

The company also is soliciting consents from noteholders to modify some restrictive covenants in the indenture to permit the issuance of the second-lien notes. A tender of the notes will also constitute consent in favor of the proposed amendments. The adoption of the amendments requires the consents by holders of a majority of the notes.

Energy XXI said it will pay $800 for each $1,000 principal amount, including a $50.00 premium for notes tendered by 5 p.m. ET on Sept. 18, the early tender date.

The offer will expire at midnight ET on Oct. 2.

The company said it has received indications of their intent to participate in the tender from holders of about $345 million principal amount of notes.

The company will issue up to $338 million of the second-lien notes in the exchange offer and the private placement.

The principal amount of second-lien notes that may be issued in exchange for senior notes will be at least $248.8 million and up to a maximum of $288 million, depending on the amount of second-lien notes and common stock sold in a concurrent placement.

With the closing of the exchange offer, the company will sell between $50 million and $89 million of the second-lien notes in the private placement.

The second-lien notes issued in the exchange offer will be designated series A notes and the second-lien notes issued in the private placement will be designated series B notes. The two series will initially bear different Cusip numbers but will otherwise have the same terms.

The second-lien notes will have a coupon of 16%, consisting of 14% payable in cash and 2% payable by increasing the outstanding principal amount of the applicable series or by issuing additional second-lien notes of the applicable series. Interest is payable on June 15 and December 15 of each year, beginning on Dec. 15.

The notes will be guaranteed by a guarantee by Energy XXI USA, Inc., the company's direct parent; the full and unconditional guarantee of Energy XXI (Bermuda) Ltd., the company's ultimate parent; and the full and unconditional guarantee of each of the company's subsidiaries.

Energy XXI is a Bermuda-based independent oil and natural gas exploration and production company.

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