Superior Energy extends exchange offer for 7 1/8% notes due 2021

Chicago, Feb. 19 – Superior Energy Services, Inc. announced that wholly owned subsidiary SESI, LLC further extended the expiration time of its offer to exchange $635 million of its $800 million outstanding 7 1/8% senior notes due 2021 (Cusip: 78412FAP9) for $635 million of new 7 1/8% senior notes due 2021.

The offer will now expire at 5 p.m. ET on Feb. 19, pushed back from 5 p.m. ET on Feb. 18 and previously extended from 11:59 p.m. ET on Feb. 13.

As of the previous expiration time, holders had tendered $617.89 million, or 77.24%, of the notes.

SESI is also waiving the exchange offer’s minimum tender condition, according to an earlier press release.

Previously, the offer was conditioned on at least $635 million of notes being tendered by the expiration time. Instead, SESI will now accept for exchange no less than $610 million of notes but no greater than $635 million of notes on the settlement date.

As previously reported, at settlement, an amount equal to the difference between the $610 million exchange offer minimum amount and the aggregate principal amount of existing notes tendered as of the expiration time (up to the $635 million exchange offer cap) will reduce (i) the aggregate principal amount of Spieth Newco, Inc. secured notes issued, (ii) the aggregate principal amount of new SESI secured notes issued and (iii) the cash component, in each case, on a pro rata basis.

As announced on Jan. 6, SESI also solicited consents to amend the existing notes. SESI and a steering committee made up of holders of 34.21% of the notes and an ad hoc group made up of holders of 61.369% of the notes had worked together to reach an agreement to amend the notes.

The proposed amendment required consents from holders of a majority in principal amount of the outstanding notes.

The company announced that because the necessary consents have been received and the supplemental indenture has been executed, tenders may no longer be withdrawn under the exchange offer.

The exchange offer and consent solicitation is being conducted in connection with Superior Energy’s previously announced entry into a definitive agreement to divest its U.S. service rigs, coiled tubing, wireline, pressure control, flowback, fluid management and accommodations service lines and combine them with Forbes Energy Services Ltd.’s complementary service lines. The exchange offer is conditioned on the combination, but the combination is not conditioned on the exchange offer and consent solicitation.

Previous amendments

The offer had previously been amended as follows:

• SESI set the exchange offer cap at $635 million, the total consideration at $1,000 of new notes per $1,000 of original notes and the consent payment at $10 per $1,000 of original notes;

• The expiration time was extended from an original expiration time on Feb. 3;

• The exchange offer was to be conditioned on the tender by the expiration time of at least $635 million of original notes and the receipt of consents from holders of over a majority of the outstanding notes to amend the liens covenant in the indenture governing the original notes to permit the issuance of the superior secured notes. These conditions have since been waived and satisfied, respectively;

• At settlement of the combination exchange, eligible holders will receive in exchange for $635 million principal amount of new notes held by those holders and accepted for exchange on a pro rata basis $250 million principal amount of 9¾% senior second-lien secured notes due 2025 to be issued by Spieth Newco, $250 million of 8¾% senior second-lien secured notes due 2026 to be issued by SESI, $135 million in cash and $6.35 million in cash constituting the total consent payment;

• The aggregate principal amount of notes to be issued by Spieth is $250 million and the aggregate principal amount of notes to be issued by SESI is $250 million;

• Subject to some exceptions, so long as the aggregate principal amount of outstanding notes to be issued by SESI exceeds $150 million, and in the event that during any semiannual period starting on July 1 excess cash flow for that period is positive, Spieth will be required on March 15 and Sept. 15 of each year beginning with March 15, 2021 to make an offer to all holders to purchase the maximum principal amount of notes that may be purchased with an amount equal to 75% of excess cash flow for the semiannual period then ended until the aggregate principal amount of outstanding notes is less than $150 million and Spieth has a total leverage ratio of less than 2 to 1; and

• If any of SESI’s 7¾% senior notes due 2024 are outstanding 91 days prior to Sept. 15, 2024, the springing maturity date, then the notes issued by SESI will mature on the springing maturity date.

Original offer

As previously reported, SESI was offering to exchange up to $500 million of its $800 million outstanding 7 1/8% senior notes due 2021 for up to $500 million of newly issued 7 1/8% senior notes due 2021 and cash.

The early participation date was 5 p.m. ET on Jan. 29, pushed back from 5 p.m. ET on Jan. 22 and, before that, from 5 p.m. ET on Jan. 17.

As reported on Jan. 6, the company was offering for each $1,000 principal amount of original notes tendered at or prior to the early participation date, an exchange consideration of $950 principal amount of new notes, subject to proration, an early participation premium of $50 principal amount of new notes, subject to proration, and a cash consent payment of $2.50.

Holders tendering after the early participation date will not be eligible to receive the early participation payment or the consent payment.

The offer was originally set to expire at 11:59 p.m. ET on Feb. 3.

In connection with the exchange offer, SESI also solicited consents from holders to amend the Dec. 6, 2011 indenture governing the original notes. The company sought to amend the lien covenant to permit the issuance of superior secured notes.

In order for the proposed amendment to be adopted, holders of a majority of the outstanding principal amount of notes had to consent to the change and those consents had to be received by the earlier of the early participation date and the date on which the necessary consents are received and a supplemental indenture is executed.

The exchange offer was conditioned on the tender of at least $250 million of original notes; however, the company had the option to reduce that threshold to $200 million.

The offer is not conditioned, though, on receiving the required consents.

However, if the needed consents are not received, the maximum aggregate principal amount of original notes that will be accepted and exchanged will be limited to $250 million, subject to proration, and the consent payment will not be made.

With the combination, the new notes will automatically exchange into up to $250 million of 8% senior second-lien secured notes due 2027 to be issued by Spieth Newco; and, only to the extent that the necessary consents are received in the consent solicitation, in an amount equal to the difference between the aggregate amount of new notes issued in the exchange and $250 million, up to an additional $250 million of 8% senior second-lien secured notes due 2027 to be issued by SESI, which would be the superior secured notes. These amounts have since been amended.

However, if the needed consents are not received, no superior secured notes will be issued.

The indenture governing the Spieth Newco notes will contain restrictive covenants customary for issuances of high-yield secured notes of this type, and the indenture governing the superior secured notes will contain restrictive covenants similar to those contained in the indenture governing SESI’s 7¾% senior notes due 2024.

Following the combination, and assuming the exchange offer is fully subscribed, SESI expects to keep the remaining $300 million of original notes outstanding. However, if the combination is not completed by May 31 or Superior Energy determines in good faith that it will be more likely than not that it will be required to treat Newco as a consolidated subsidiary following the combination, the new notes issued in the exchange offer will be automatically exchanged for an equal principal amount of original notes to be issued as add-on notes.

D.F. King & Co., Inc. (attn.: Andrew Beck, 212 269-5550, 800 431-9633, spnv@dfking.com) is the information agent for the Rule 144A and Regulation S exchange offer and consent solicitation.

Based in Houston, Superior Energy provides oilfield services and equipment.

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