Transmeridian to get $215 million cash boost from United Energy Group

By Lisa Kerner

Charlotte, N.C., June 11 - United Energy Group Ltd. agreed to acquire at least 90% of Transmeridian Exploration Inc.'s outstanding shares of 15% senior redeemable convertible preferred stock and 20% junior redeemable convertible preferred stock under an investment agreement between the two companies worth an estimated $215 million.

United Energy will make a cash infusion to fund the Houston independent energy company's ongoing capital expenditure program and working capital requirements, a Transmeridian news release said.

The agreement calls for United Energy to receive shares of new preferred stock and warrants to purchase common stock, representing approximately 60% of the capital stock of Transmeridian on an as-converted, fully diluted basis in exchange for the preferred stock it acquires and the cash infusion.

Approval by Transmeridian shareholders and United Energy shareholders is required.

It was also reported that United Energy entered into purchase agreements with some "significant" holders of preferred stock to acquire about 70% of the outstanding shares of senior preferred stock and 72% of the outstanding shares of junior preferred stock.

United Energy agreed with a significant holder to exchange its holdings of senior preferred stock for convertible bonds of United Energy and with some other holders to purchase shares for cash or United Energy convertible bonds.

According to the release, under the purchase agreements, United Energy will purchase the shares of junior preferred stock from these holders for cash or, at the election of the holders, a combination of cash and shares of common stock of Transmeridian.

United Energy will begin a tender offer to acquire the remaining shares of preferred stock not subject to the purchase agreements. The tender offer has a minimum 90% acceptance threshold that includes the shares subject to the purchase agreements.

A separate exchange offer by Transmeridian of current 12% senior notes for cash and new notes is conditioned on completion of United Energy's tender offer. The tender offer is also contingent on completion of the exchange offer, Transmeridian noted.

Once the two offers are closed, Transmeridian said it will issue to United Energy shares of a new series of preferred stock of Transmeridian and warrants to purchase shares of Transmeridian common stock in exchange for the shares of preferred stock acquired in the tender offer and the purchase agreements as well as an additional amount in cash.

These shares of new preferred stock and common stock underlying the warrants will represent approximately 60% of Transmeridian's capital stock, as noted above.

United Energy, an investment holding company, will be entitled to appoint up to four directors of Transmeridian as a result of the transaction.

Citigroup Global Markets Inc. is the exclusive financial adviser to United Energy, while Jeffries & Co. is advising the special committee of Transmeridian's board of directors.

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