NGAS swaps 6% convertibles due 2010 for new notes, shares, warrants

By Devika Patel

Knoxville, Tenn., Jan. 12 - NGAS Resources, Inc. investors agreed to swap $37 million of the company's existing 6% convertible notes due Dec. 15, 2010 for $28.7 million in new 6% amortizing convertible notes due May 1, 2012, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

The investors also will receive approximately $2.7 million in cash, 3,037,151 common shares and five-year warrants for 1,285,038 shares.

The new notes will have a conversion price of $2.18 per share. The warrants are exercisable at $2.37. From June 1 through maturity, the company will make 24 monthly principal amortization payments on the new notes, each representing 4.17% of the principal, along with accrued interest.

"We are very pleased to have reached these agreements with our noteholders," chief executive officer William S. Daugherty said in a press release. "In addition to reducing the face amount of our convertible debt and extending its maturity, the exchange creates the potential for gradually replacing the debt with equity at a premium to the current stock price.

"This is an important step," Daugherty continued, "along with last year's gathering system monetization and equity raise, to further strengthen our balance sheet and create a more appropriate capital structure to support the company's future growth."

NGAS is an exploration and production company based in Lexington, Ky.

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