Frontera Resources extends exchange offer for convertibles, warrants

By Jennifer Chiou

New York, May 26 - Frontera Resources Corp. announced the extension of its exchange offer for two series of its convertible notes and certain warrants to 6 p.m. ET on June 23 from May 25.

Affected notes include any or all of the company's 10% convertible notes due May 2012 and 10% convertible notes due July 2013.

The offer was originally scheduled to expire on May 11. At the original deadline, holders had tendered $3,865,000 of the 2012 notes and none of the 2013 notes, as well as 5,468,638 placement warrants. The offer began on April 13.

As of 6 p.m. ET on May 25, holders had tendered $5,145,084.55 of the 2012 notes and $593,980.74 of the 2013 notes in addition to 5,468,638 warrants.

At the option of tendering noteholders, they may receive either of the following:

• 4,336.33 shares of common stock for each $1,000 principal amount of old notes; or

• $1,000 principal amount of new 10% convertible notes due in 2015 for each $1,000 of old notes; or

• A combination of stock and new notes.

As of March 31, there was $78,818,314 of the 2012 notes, convertible into common stock at the rate of 598.80 shares for each $1,000 principal amount, equivalent to a conversion price of $1.67 per share.

As of the same date, there was $27,918,975 of the 2013 notes, convertible into stock at a rate of 584.80 shares per $1,000 principal amount, equivalent to a conversion price of $1.71 per share.

The company's shares closed at $0.06 apiece on May 25.

New notes

The new notes will be substantially similar to the terms of the old notes, except that they will be senior to the old notes.

The new securities will mature on June 30, 2015 and will be convertible into 833.33 shares per $1,000 principal amount for a conversion price of $1.20 per share.

Consent solicitation

Frontera is also soliciting consents to amend the note purchasing agreements governing the old convertibles to allow for the exchange offer and to remove most of the restrictive covenants.

The offer is conditioned on holders of at least 70% total of the old notes electing to receive the stock payment option.

If holders of less than the 70% threshold elect to receive stock, those holders electing the stock option will instead receive the new notes.

Holders will also receive accrued interest.

Warrants

The affected warrants were issued on Sept. 18, 2009 in a private placement of shares.

The 45,186,536 of two-year warrants and 1,355,596 of 18-month warrants allow holders to purchase shares at a price of £0.15 per share.

Frontera is offering holders of the warrants the opportunity to exchange for new warrants exercisable at a price of £0.076, or $0.117, per share, which is 90% of the average closing market price for the 20 trading days preceding the date of the exchange offer.

If all holders elect to exchange, the company said that the amount of new shares to be issuable on the exercise of the new warrants will be increased to 91,859,471, which is in the same proportion to the ratio of the original exercise price to the new exercise price.

Frontera added that the purpose of the offer is to increase the company's operating and financial flexibility.

Questions may be directed to Liz Williamson (713 585-3216). Computershare Trust Co., NA is the depositary and exchange agent (781 575-4154 by phone or 781 575-2420 by fax).

Frontera is an independent oil and gas exploration and production company with headquarters in Houston.

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