Superior Energy amends exchange offer, consent bid for 7 1/8% notes

By Sarah Lizee

Olympia, Wash., Feb. 3 – Superior Energy Services, Inc. announced that the tender exchange offer and consent bid for wholly owned subsidiary SESI, LLC’s $800 million outstanding 7 1/8% senior notes due 2021 (Cusip: 78412FAP9) has been amended.

As previously reported, 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 worked together to reach an agreement to amend the notes.

The offer was be amended so that

• SESI will offer to exchange up to $635 million of the 7 1/8% senior notes due 2021 for up to $635 million of new 7 1/8% senior notes due 2021. The total consideration per $1,000 of original notes will be $1,000 of new notes. The consent payment will be $10 per $1,000 of original notes;

• The expiration time was extended to 11:59 p.m. ET on Feb. 10 from 11:59 p.m. ET on Feb. 3;

• The exchange offer is conditioned on the valid 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;

• At the 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, Inc., $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 set to expire at 11:59 p.m. ET on Feb. 3. The offer is expected to settle on the second business day after the expiration date.

In connection with the exchange offer, SESI is also soliciting consents from holders to amend the Dec. 6, 2011 indenture governing the original notes. The company is seeking 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 must consent to the change and those consents must 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.

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.

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.

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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