Dune Energy extends exchange offer, restructuring vote for 10½% notes

By Susanna Moon

Chicago, Dec. 14 - Dune Energy, Inc. said it extended the exchange offer and consent solicitation for its 10½% senior secured notes due 2012 to 5 p.m. ET on Dec. 20.

The exchange offer was originally set to expire at 11:59 p.m. ET on Dec. 13.

Investors had tendered $292,758,000 principal amount of the notes as of 5 p.m. ET on Dec. 13.

Dune also pushed back the voting deadline on its prepackaged plan of reorganization to coincide with the offer deadline, according to a company press release.

The company announced on Nov. 23 that holders of roughly 74% of its 10% senior redeemable convertible preferred stock delivered consents to approve the terms of its financial restructuring plan.

Under the plan, the company will convert all of the preferreds into $4 million in cash and 58,433,825 shares of common stock.

Dune Energy already had restructuring support agreements with the holders of 96% of the 10½% notes and 64% of the convertibles when the plan was announced earlier in the month.

If the exchange offer is fully subscribed, the noteholders will own 97.25% of Dune's common stock on a post-restructuring basis, the holders of the convertibles will own 1.5%, and the company's current stockholders will own 1.25%.

As an alternative to the exchange offer, Dune is soliciting consents from the holders of the notes and convertibles to approve a pre-packaged plan of reorganization in a Chapter 11 bankruptcy. The plan would have principally the same effect as if 100% of the notes had been tendered in the exchange offer.

"The overwhelming approval by the holders of our preferred stock is an important milestone on the path to completion of our restructuring, which we intend to complete before the end of this year," James A. Watt, Dune's president and chief executive officer, said in a previous news release.

"We appreciate the support shown by our preferred stockholders, and look forward to closing our pending debt exchange offer as soon as possible, so that we can free up cash flow and be in a position to exploit our asset base on a solid financial footing."

Exchange offer details

In exchange for the 10½% notes, Dune Energy is offering the following:

• 251 million shares of newly issued common stock;

• 250,000 shares of its series C convertible preferred stock, which will automatically convert into 3.54 billion shares of common stock once all of the conditions to the exchange offer are satisfied; and

• At the company's options, either $50 million principal amount of newly issued floating-rate senior secured notes due Dec. 15, 2016 or $50 million in cash.

The interest rate of the new notes will be 13% plus the greater of 1.5% and Libor. Of this, 3% is payable in cash and the remainder is payable in cash or kind.

For each $1,000 principal amount of 10½% notes, holders will receive 836.8739 shares, 0.833333 convertibles, which could convert into 14,149.6 shares of common stock, and either $166.67 principal amount of new notes or $166.67 in cash.

The company will not pay accrued interest.

In conjunction with the exchange offer, Dune is soliciting consents to the release of all liens securing the existing notes and the adoption of proposed amendments to the indenture governing the notes to, among other things, eliminate substantially all of the restrictive covenants, some events of default and other related provisions.

Holders who tender must deliver consents and vice versa.

Under the pre-packaged plan of reorganization, the noteholders would receive common stock and a payment of $50 million in the form of either new notes or cash.

The exchange offer is conditioned on the receipt of tenders for at least 98% of the notes, consents for at least three-fourths of the outstanding notes and consents from the holders of at least two-thirds of the outstanding convertibles.

The information agent and exchange agent for the exchange offer is Global Bondholder Services Corp. (banks and brokers call 212 430-3774, others call 866 470-4200).

Dune Energy is a Houston-based energy company.

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