Frontier Oil begins consent solicitation for 8½% notes, 6 7/8% notes

By Angela McDaniels

Tacoma, Wash., May 13 - Frontier Oil Corp. is soliciting consents to amend the indentures governing its $200 million of 8½% senior notes due 2016 and $150 million of 6 7/8% senior notes due 2018, according to a company news release.

Frontier has agreed to become a subsidiary of Holly Corp. The companies' management teams are evaluating an internal restructuring of some Holly and Frontier legal entities, which may include an internal merger of Frontier into Holly. If this internal merger is consummated, Holly would assume the obligations under Frontier's notes and indentures and some of Holly's subsidiaries would guarantee the notes.

Holly Energy Partners, LP, a publicly traded limited partnership in which Holly has a 34% ownership interest, is currently an unrestricted subsidiary under an indenture governing the outstanding senior notes of Holly. The proposed amendments to the Frontier indentures would designate Holly Energy Partners and its subsidiaries as "unrestricted subsidiaries" under the indentures and would except those entities and certain affiliates from some covenant restrictions so as to "better facilitate a successful integration of Holly and Frontier," according to the release.

The company is seeking additional amendments with respect to the transactions with affiliates and additional guarantor covenants.

The proposed amendments would substantially conform the treatment of Holly Energy Partners and its subsidiaries under Frontier's indentures to the treatment of such entities under the indenture governing Holly's senior notes.

Frontier is offering a consent fee of $1.25 per $1,000 principal amount of notes to holders of record as of 5 p.m. ET on May 12.

The consent solicitation will expire at 5 p.m. ET on May 26.

Noteholder consent is not required to complete the merger.

The consent solicitation is subject to the receipt of consents from a majority of the holders of each series of notes.

UBS Investment Bank (888 719-4210) is the solicitation agent.

Holly is a Dallas-based petroleum refiner. Frontier is a Houston-based independent oil refiner and wholesaler of refined petroleum products.

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