SM Energy withdraws convertible notes due 2021 from exchange offer

By Sarah Lizee

Olympia, Wash., May 6 – SM Energy Co. announced amendments to its offers to exchange several series of notes for newly issued senior notes.

The company amended the terms of the exchange offers to withdraw its offer to exchange and solicit consents for its outstanding 1.5% senior convertible notes due 2021, reduce the maximum exchange amount of new notes that the company will issue in the exchange offers to $825 million from $900 million of new notes, and modify the acceptance priority cap to apply to acceptance priority levels equal or lower to acceptance priority two.

In connection with the withdrawal of the exchange offer and the consent solicitation with respect to the 2021 notes, the company will cause effective provisions to be made to grant holders of the 2021 notes an equal and ratable security interest in the collateral securing the new notes concurrently with the closing of the exchange offers.

Other terms of the offers are unchanged, the company noted.

As previously reported, the company is offering the following exchange considerations for its existing notes, which are listed in order of acceptance priority level:

• $436.05 million 6 1/8% senior notes due 2022 (Cusip: 78454LAK6) for $650 of new 10% senior secured notes due Oct. 15, 2023 per $1,000 of existing notes tendered;

• $500 million 5% senior notes due 2024 (Cusip: 78454LAH3) for $500 of new 10% senior secured notes due Jan. 15, 2025 per $1,000 of existing notes tendered;

• $500 million 5 5/8% senior notes due 2025 (Cusip: 78454LAL4) for $500 of new 10% senior secured notes due June 1, 2026 per $1,000 of existing notes tendered;

• $500 million 6¾% senior notes due 2026 (Cusip: 78454LAN0) for $500 of new 10% senior secured notes due Jan. 15, 2027 per $1,000 of existing notes tendered; and

• $500 million 6 5/8% senior notes due 2027 (Cusip: 78454LAP5) for $500 of new 10% senior secured notes due Jan. 15, 2027 per $1,000 of existing notes tendered.

Before the amendment, the $172.5 million of 1.5% senior convertible notes due 2021 (Cusip: 78454LAM2) were exchangeable for $600 of new 10% senior secured notes due Aug. 1, 2022 per $1,000 of existing notes tendered.

The early tender time is 5 p.m. ET on May 12. Holders who tender their notes by the early tender time will receive the exchange consideration, while holders who tender their notes after the early tender time will receive the exchange consideration minus $50 of new notes per $1,000 of existing notes tendered under the exchange.

Holders will also receive accrued interest.

The offers will expire at 5 p.m. ET on May 27.

Settlement is expected for June 1.

Tenders may be withdrawn by the early tender time.

The company said it will not accept for exchange more than $1.35 billion aggregate principal amount of old notes having acceptance priority levels equal to or lower than acceptance priority level two, modified with the amendment from priority level three.

In conjunction with the exchange offers, SM Energy is soliciting consents for some proposed amendments to each indenture governing the old notes to eliminate substantially all of the restrictive covenants and some of the default provisions contained therein.

The exchange offers are not conditioned on receiving requisite consents from holders of any series of the old notes. Holders of old notes may not tender old notes without delivering the related consents, and holders of old notes may not deliver consents without tendering the related old notes.

To adopt the proposed amendments, SM Energy must receive consents from holders representing a majority of the outstanding principal amount of the relevant series of old notes.

The information agent and exchange agent is D.F. King & Co., Inc. (866 620-2536 toll-free, 212 269-5550 for banks and brokers or sm@dfking.com).

SM Energy is a Denver-based energy company focused on exploration and production of crude oil, natural gas and natural gas liquids in onshore fields in North America.

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