Ad Hoc Committee of Pacific Noteholders Comments on Revised EIG Tender Offer

TORONTO, Feb. 12, 2016 /CNW/ - As announced on January 15, 2016, the Ad Hoc Committee of Noteholders (the "Ad Hoc Committee") of Pacific Exploration & Production Corp. (TSX: PRE) (BVC: PREC) ("Pacific" or the "Company") consists of holders of the 5.625% notes due January 19, 2025 (the "5.625% Notes"), the 5.375% notes due January 26, 2019 (the "5.375% Notes"), the 5.125% notes due March 28, 2023 and the 7.25% notes due December 21, 2021 (collectively, the "Notes") issued by Pacific. The Ad Hoc Committee holds in the aggregate approximately 40% of the approximately U.S.$4.1 billion principal outstanding amount of the Notes, and is in regular contact with holders of a significant additional amount of the Notes.

The Ad Hoc Committee was formed in response to the Company's announcement on January 14, 2016 regarding its election to utilize the 30 day grace period under the indentures governing the 5.625% Notes and the 5.375% Notes rather than making the interest payments due on January 19, 2016 and January 26, 2016 in respect of those Notes, and other matters, including: (i) the tender offer for the Notes first announced on January 13, 2016, as amended on January 19, 2016 (the "EIG Tender Offer") by EIG Pacific Holdings Ltd. ("EIG"); and (ii) more generally, to dialogue with the Company and its advisors, and the Company's other stakeholders and their advisors, regarding the exploration and development of consensual solutions to the Company's current financial circumstances.

The Ad Hoc Committee has reviewed the terms of the revised EIG Tender Offer announced by EIG on February 10, 2016 (the "Revised EIG Tender Offer") and, without commenting on the adequacy of the tender offer price, has the following key concerns regarding the Revised EIG Tender Offer:

  • Involvement of Ad Hoc Committee in Revised EIG Tender Offer: The terms of the Revised EIG Tender Offer were not previewed or discussed with the Ad Hoc Committee or its advisors, and have not been accepted by the Ad Hoc Committee.

  • Highly Conditional Offer: While EIG is offering between U.S.$80 and U.S.$160 per U.S.$1,000 excluding accrued interest, there continues to be no certainty as to when or if any such amounts will be paid. As a result of multiple other terms of the offer, the offer continues to be highly conditional and can be amended, modified and/or terminated in the sole discretion of EIG. EIG is under no obligation to accept any tendered Notes and there is no guarantee that EIG will complete the offer. The offer is contingent on, among other things, (i) agreement by the Company's bank lenders to new debt financing arrangements, which are not described and (ii) EIG obtaining power of attorney rights over 66.67% of the aggregate principal amount of each series of the Notes, which condition cannot be met without participation by Ad Hoc Committee members.

  • Lack of Information: The Revised EIG Tender Offer has been structured to require holders to quickly tender their Notes and submit powers of attorney before holders have received full details on, among other things, EIG's intentions for the Company and the feasibility of EIG meeting the conditions to its tender offer. Noteholders have only been given until February 24, 2016 to take advantage of the early tender premium.

  • Tendering Holders May Lose Control of their Investment for an Extended Period of Time: Holders who tender to the offer may be forced to wait for an extended period of time before receiving consideration for their Notes, if any, and will have only a very limited and highly conditioned ability to withdraw or trade tendered notes following the February 24, 2016 withdrawal deadline. The Revised EIG Tender Offer is subject to a number of conditions, including (i) the commencement of CCAA or other insolvency proceedings, (ii) agreement by the Company's bank lenders to certain bank financing arrangements, which are not described, (iii) EIG obtaining power of attorney rights over 66.67% of the aggregate principal amount of each series of the Notes, which condition cannot be met without participation by Ad Hoc Committee members, and (iv) EIG receiving access to certain information from the Company. Tendering holders will have no control over their investment or input on any reorganization of the Company during this process, nor will they receive any consideration for giving up this control for a potentially extended period of time.

  • Lowered Price: The price offered for the Notes under the Revised EIG Tender Offer has been reduced to U.S.$80 and U.S.$160 per U.S.$1,000 (excluding accrued interest) from U.S.$125 and U.S.$175 per U.S.$1,000 (plus accrued interest).

For these reasons, the Ad Hoc Committee continues to have significant concerns with the structure and terms of the EIG Tender Offer, including under the Revised EIG Tender Offer. The Ad Hoc Committee intends to continue to engage in discussions with EIG (and other interested parties) regarding their overall interest in the Company, in light of the Ad Hoc Committee's objective of considering any and all available overall solutions to the Company's current financial circumstances.

This announcement is being made for information purposes only, and is not intended to be, and does not constitute, and must not be taken as, legal or financial advice of any kind or the basis for a tender decision or any investment activity of any kind. Noteholders are encouraged to seek their own professional advice.

SOURCE Goodmans

For further information: Goodmans LLP, 416-979-2211

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