Dune Energy exchanges 99% of 10½% notes, converts all 10% convertibles

By Angela McDaniels

Tacoma, Wash., Dec. 22 - Dune Energy, Inc. converted all of its 10% senior redeemable convertible preferred stock and exchanged 99% of its 10½% senior secured notes due 2012 as part of its restructuring plan, according to a company news release.

The plan also included a new credit facility and a 1-for-100 reverse stock split.

The company's pre-restructuring common stockholders now hold 1.35% of Dune's common stock on a post-restructuring basis.

"We are pleased to have completed this financial restructuring on a fully consensual basis with the support of our creditors and preferred stockholders and without any disruption of Dune's operations," James Watt, president and chief executive officer, said in the release.

As an alternative to the exchange offer, Dune solicited 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 had principally the same effect as if 100% of the notes had been tendered in the exchange offer.

Convertibles

The preferreds were converted into $4 million of cash and common stock representing 1.6% of Dune's common stock on a post-restructuring basis.

The company solicited and received consents from the holders before making the conversion.

Exchange offer

The company received tenders for $297,012,000 principal amount of its 10½% notes in its exchange offer.

In exchange for the notes, the holders received 97% of Dune's common stock on a post-restructuring basis and about $49.5 million principal amount of newly issued floating-rate senior secured notes due Dec. 15, 2016.

Dune Energy offered 251 million shares of newly issued common stock, 250,000 shares of its series C convertible preferred stock and, at its option, either $50 million principal amount of the new floating-rate notes or $50 million in cash.

The preferreds were automatically converted into common stock once all of the conditions to the exchange offer were satisfied.

The interest rate of the new notes is 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 received 836.8739 shares, 0.833333 convertibles, which converted into 14,149.6 shares of common stock, and $166.67 principal amount of new notes.

The company did not pay an additional consideration for accrued interest.

The exchange offer ended at 5 p.m. ET on Dec. 20 after the deadline was extended from 11:59 p.m. ET on Dec. 13.

In conjunction with the exchange offer, Dune solicited 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 tendered had to deliver consents and vice versa.

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

The exchange offer was 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.

New credit facility

As part of its overall restructuring efforts, Dune entered into a $200 million senior secured revolving credit facility with an initial borrowing base limit of up to $63 million.

BMO Capital Markets Corp. is the arranger and bookrunner, Bank of Montreal is the administrative agent, and CIT Capital Securities LLC is the syndication agent.

The letters of credit and proceeds of loans under the new credit facility can only be used to fund the cash portion of the restructuring or refinancing debt under the term loan with Wayzata Opportunities Fund II, LP, for the acquisition and development of oil and natural gas properties and for general corporate purposes.

The credit facility is secured by a first-priority lien on substantially all of the assets of Dune and its subsidiaries. The same collateral is also subject to a subordinated lien securing the new notes.

The information agent and exchange agent for the exchange offer was 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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