Wentworth gets forbearance agreement to seek restructuring of convertibles

By Laura Lutz

Des Moines, Sept. 4 - Wentworth Energy, Inc. received a forbearance agreement from the lead holder of its senior secured convertible notes, according to an 8-K filing with the Securities and Exchange Commission.

Wentworth and the holder agreed to use their reasonable best efforts to negotiate an agreement to restructure the $24 million of convertibles by Sept. 30.

Under the forbearance agreement, the holder said it would forbear from foreclosing on the company's properties until at least Oct. 2.

The proposed restructuring would include the following terms:

• The agreements would add $21,426,572 to the face amount of the convertibles, resulting in a new total face amount of $53,776,572. The amount to be added includes $16,426,572 for interest, penalties and damages and $5 million in new money to be invested by the noteholders.

• The notes would have a maturity date of Sept. 30, 2010. Noteholders would have the option to extend the maturity by up to two years.

• The interest rate of the amended notes would remain at 9.15% per year.

• The conversion price would be lowered to $0.75 from the initial conversion price of $1.40.

• If holders of at least 51% of the principal amount of the notes agree, noteholders would be able to force the company to redeem one-third of the original principal amount of the notes at par plus accrued interest on Sept. 30, 2008 and Sept. 30, 2009.

• If the put option were exercised, the company would be entitles to redeem all of the outstanding notes at par plus a premium of 8.3% on Sept. 30, 2008 or a premium of 9.15% on Sept. 30, 2009. If the company exercised its early redemption option, series B warrants for 50% of the amount being redeemed would become exercisable at $0.75 per share.

• Noteholders would receive a total of 3,746,426 additional series A warrants. They, along with the existing 46,214,287 series A warrants, would be exercisable at $0.001 for seven years. The shares issued upon exercise would not be required to be registered.

• Wentworth would receive a waiver for all breaches or events of default before Sept. 30.

As reported on Aug. 16, the trustee for the convertibles had filed notices of foreclosure for the oil and gas properties securing the notes. The foreclosure sale was set for Sept. 4.

Camofi Master LDC, Highbridge International LLC and Castlerigg Master Investments, Ltd. issued notices of default for the convertibles earlier this year. Wentworth received the notices on April 26, April 30 and May 1.

The redemption price that the three holders claimed was more than $33.6 million plus interest.

Wentworth denied the alleged default in an 8-K filed on May 2.

"The company disagrees with certain aspects of the defaults asserted with the amounts claimed and with the imposition of various aspects of the penalty provisions asserted. The company does not intend to redeem the notes pursuant to the demands and does not presently have the funds to do so," that filing said.

The notes were sold in July 2006 in principal of $30.85 million. Camofi, Highbridge and Castlerigg are three of six holders of the 9.15% convertibles. They are due July 25, 2009 and are convertible at $1.40 each.

Located in Fort Worth, Texas, Wentworth is an oil and natural gas exploration and development company focused on projects in the Gulf Coast and eastern Texas.

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