By Paul Deckelman
New York, June 23 - Stone Energy Corp. sold $225 million of four-year floating-rate senior notes with a coupon of Libor plus 275 basis points at a price of 99.75 Friday morning, high-yield market sources said.
Proceeds of the deal will most likely to be used to fund the Lafayette, La.-based independent oil and gas exploration and production company's purchase of Gulf of Mexico energy assets.
The sources said that the notes, which mature on July 15, 2010, priced at 99.75.
The notes will be immediately callable at par, the sources said, and the indenture contains a provision for a one-time 100 basis-point coupon step up 12 months from the issuance date.
In the event of a change of control of the company, the notes will be mandatorily redeemable at par plus accrued interest within 30 days.
Stone Energy was recently entertaining competing takeover offers from Energy Partners Ltd. and Plains Exploration and Production Co., before electing Thursday to terminate its previously agreed to deal with Plains Exploration in order to accept Energy Partners' higher offer, which totals $2.2 billion, including debt assumption.
Energy Partners will pay $51 in cash or stock, at the election of the shareholder, for each share of Stone Energy, a buyout price that values Stone's equity at $1.4 billion. Energy Partners plans to refinance roughly $800 million of Stone's debt and also agreed to pay the $43.5 million break-up fee due to Plains Exploration for termination of the latter's $1.943 billion deal, which had included the assumption of $483 million of Stone debt. The takeover transaction should close early in the fourth quarter.
The first indications of the drive-by bond offering appeared late Tuesday in the company's announcement of the planned Gulf asset purchase, although the details of the note sale did not emerge until Wednesday morning.
The deal was quickly marketed to potential investors over the next two days, including via a conference call on Wednesday afternoon. There had been some expectations in the market that the deal was going to price Thursday, but the pricing did not occur until Friday. The deal was brought to market by bookrunning manager Banc of America Securities LLC.
Stone announced plans on Tuesday to buy additional stakes in two Gulf of Mexico drilling blocks for $190.5 million. The company would increase its working interest in Mississippi Canyon Block 109 to 100%, up from 33% currently, and would raise its stake in Mississippi Canyon Block 108 to 24.8%, up from 16.5% Stone also would become the operator of the field.
Production at the two blocks is shut in, or operating at greatly reduced levels, as it awaits repairs to an oil pipeline damaged last year during Hurricane Katrina, the company said. It expects the $15 million of repairs to be made before the end of the year and anticipates its announced acquisition of the increased stakes in the two drilling blocks to close either late this month or early in the third quarter.
Stone said that if it does not complete its acquisition of those Gulf of Mexico assets, it will use the proceeds of the floating-rate notes to reduce existing credit facility debt.
Moody's Investors Service assigned a B3 rating to the new deal, although it kept the company's B2 corporate family rating and Caa1 senior subordinated notes ratings under review, with direction uncertain.
Standard & Poor's gave the deal a B rating and a developing CreditWatch outlook.
| Issuer: | Stone Energy Corp.
|
| Amount: | $225 million
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| Issue: | Floating-rate senior notes
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| Maturity: | July 15, 2010
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| Bookrunner: | Banc of America Securities LLC
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| Coupon: | Three-month Libor plus 275 basis points; one-time 100 bps step-up on July 15, 2007
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| Price: | 99.75
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| Call: | Callable immediately at par
|
| Change of control: | Mandatory at par plus accrued interest within 30 days of event
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| Pricing date: | June 23
|
| Settlement date: | June 28
|
| Ratings: | Moody's: B3
|
| Standard & Poor's: B
|
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