Pacific Exploration enters into restructuring support agreement with committee members, lenders

By Sheri Kasprzak

New York, April 21 – Pacific Exploration & Production Corp. has entered into a definitive support agreement for a restructuring transaction with certain committee members, credit facility lenders and the Catalyst Capital Group Inc., according to a statement from Pacific Exploration.

The arrangement is connected to the company’s previously announced agreement with Catalyst to effect a comprehensive financial restructuring that will significantly reduce debt, improve liquidity and position the company to navigate the current oil price environment, the statement said.

The transaction is being supported by certain members of an ad hoc committee of holders of senior unsecured notes, certain lenders under its credit facilities and the Catalyst Capital Group Inc.

Under the terms of the restructuring transaction:

• The company’s operations will continue without disruption with regular payments being made to all of the suppliers, trade partners and contractors of the company’s subsidiaries across the jurisdictions in which it operates in accordance with local regulations, and all employees will continue to be paid throughout the process without disruption. The company’s bank debt and indebtedness in respect of its senior unsecured notes will be restructured under the terms of the restructuring transaction;

• A $500 million debtor-in-possession financing, less a 4% original issue discount, will be provided by certain supporting noteholders and Catalyst;

• The DIP providers will receive warrants to acquire their pro rata share of 25% of the fully diluted common shares of the company;

• Creditors have committed to a $250 million 10% DIP financing that will not be repaid at exit of the restructuring transaction and will convert into five-year secured notes;

• Catalyst has committed to providing a $250 million DIP facility that is convertible or exchangeable for 16.8% of common shares of the reorganized company;

• Bank lenders have committed to a $134 million letter-of-credit facility;

• Claims by the company’s creditors totaling $4.1 billion of senior unsecured notes, $1.2 billion of obligations under its credit facilities, as well as claims of certain other unsecured creditors of the company will be fully extinguished and exchanged for 58.2% of common shares of the reorganized company;

• Affected creditors will have the opportunity to receive cash in lieu of some or all of the common shares of the reorganized company that they would otherwise by entitled to receive;

• On the completion of the restructuring transaction, it is expected the fully diluted shares of the reorganized company will be allocated with Catalyst receiving 29.3%, funding creditors receiving 12.5% and affected creditors receiving 58.2%;

• No equity of the company will be awarded to management or the company’s executive co-chairman, other than in respect of any unsecured notes held by them, pro rata to all other noteholders, on implementation of the restructuring transaction;

• The restructuring transaction contemplates the appointment of a chief restructuring officer and a deputy chief financial officer acceptable to Catalyst, the supporting creditors and the independent committee of the board of directors;

• Upon the completion of the restructuring transaction, the new board of directors will be established comprised of seven members, which will have three nominees selected by Catalyst, two independent nominees selected by Catalyst and the supporting creditors and one independent individual proposed by the supporting noteholders and one independent individual proposed by the supporting bank lenders;

• Key management positions will need to be affirmed by the new board upon completion of the restructuring transaction and the board will work to implement a strong governance framework to guide the company going forward;

• The company will implement a new management incentive plan on terms to be determined by the new board with no entitlements of any kind being ascribed to any current management, officers or directors of the company under the terms of the new management incentive plan with all such entitlements being determined by the new board in the future.

“We are pleased to have reached the terms of a restructuring transaction that will significantly strengthen the company and ensure the long-term viability of the business, all without impacting our ability to serve our customers, suppliers and other stakeholders in the jurisdictions in which we operate, such as Colombia and Peru,” said Ronald Pantin, the company’s chief executive officer, in a statement.

“We are confident that the company will emerge from this process as a stronger entity, best-positioned to weather the current oil price environment and capitalize on opportunities once the market adjusts.”

Based in Toronto, Pacific Exploration is an oil and natural gas exploration company with operations in Latin America.

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