Transmeridian Exploration changes payout in exchange offer for 12% notes, extends deadline

By Angela McDaniels

Tacoma, Wash., Sept. 23 - Transmeridian Exploration Inc. said it amended the exchange offer for its $290 million 12% senior secured notes due 2010 so that holders who tender will receive $200 in cash and $800 principal amount of new 12% senior secured notes due 2010 for each $1,000 principal amount of existing notes.

The company also extended the offer deadline to 5 p.m. ET on Oct. 7 from midnight ET on Oct. 1 and removed the consent payment deadline for the concurrent consent solicitation.

Previously, the company was offering $101 in cash and $900 of new 12% notes. The cash amount included a $30 consent payment for notes tendered by the consent deadline, which was scheduled for 5 p.m. ET on Sept. 24.

The offer was also amended so that the collateral securing the existing notes and the new notes will be expanded to include intercompany debt, and additional modifications will be made to some restrictive covenants limiting the ability of Transmeridian and its subsidiaries to incur debt, make restricted payments, enter into transactions with affiliates and sell some assets, according to a company news release.

The company said that if more than $222.16 million of notes - 90% of the outstanding notes not held by United Energy Group Ltd. - are tendered, it will increase the cash amount paid and reduce the principal amount of new 12% notes issued.

In this case, the total cash amount payable will equal $44.43 million plus an amount equal to 101% of the principal amount of existing notes tendered in excess of $222.16 million. The total principal amount of new 12% notes issuable will be $177.73 million, regardless of the amount of existing notes tendered. The cash amount and principal amount of new notes will be allocated ratably to all holders who exchange.

The new notes will be identical to the existing notes but will not include the right to have the securities repurchased upon the closing of the transactions between Transmeridian and United Energy Group.

Once the transactions between the companies are completed, however, Transmeridian said it will offer to repurchase any existing notes not exchanged in the exchange offer. If less than all of the existing notes are repurchased in that offer, the company will apply the amount of cash not used to fully repurchase the existing notes to mandatorily redeem the new notes on a pro rata basis at par plus accrued interest.

Transmeridian will not be required to redeem the new notes unless the total principal amount of new notes to be redeemed is at least $2 million, the release noted.

The company said that beneficial holders of more than 90% of the existing notes not held by United Energy have said they plan to tender their notes into the exchange offer, subject to certain conditions.

The exchange offer began on July 23. It was originally scheduled to expire on Aug. 21 and has been extended a number of times.

The company said that as of 5 p.m. ET on Sept. 22, holders of $16.69 million of the notes had tendered and not withdrawn their notes. The figure was $30.15 million on Sept. 10 and $34.01 million on Aug. 22.

Conditions to the exchange include the receipt of tenders for at least 90% of the notes, excluding any held by United Energy, and successful completion of a tender offer to be conducted by United Energy for Transmeridian's senior and junior preferred stock.

Consents are needed from holders of a majority of the notes, excluding any held by United Energy.

Successful completion of the exchange offer and consent solicitation is a condition to the completion of the transactions between Transmeridian and United Energy.

Only qualified institutional buyers under Rule 144A, institutional accredited investors under Regulation D, or non-U.S. persons may participate.

Transmeridian Exploration is a Houston-based energy company.

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