Pacific Exploration Announces Another Restructuring Plan Delay

Pacific Exploration & Production Corporation continues to wait on the release of a lien by its Colombian regulator in order to complete the restructuring deal that will allow it to exit creditor protection. According to the Canadian energy company, this lien release by Colombia’s Superintendence of Corporations is the final — and slow — hurdle in an arrangement with Catalyst Capital Group Inc. that was formally approved in August and has been in the works since at least March.

“The company has made submissions to the Superintendence in respect of this lien and is waiting for a decision,” said Pacific Exploration in a statement. “The company will issue a further news release at such time as the decision is made in order to confirm timing of closing of the [Catalyst] restructuring.”

This represents at least the second unexpected delay this month for Pacific Exploration. In September, it projected to close on the Catalyst plan during the week of October 3. When that proved overly optimistic, the company said that its agreement with Catalyst Capital would close on October 12, “assuming satisfaction or waiver of the remaining conditions, including finalization of negotiations with respect to certain pending matters.”

This hold up with the Superintendence was apparently one of those pending matters that the company expected to be complete at least 10 days ago. Pacific Exploration is quick to assure the market that this delay should not affect any aspects of the already-announced details of its recapitalization plan with Catalyst.

“The company confirms that the share or cash distributions under the plan as set out in the company’s news release of September 26, 2016 remain unchanged,” said Pacific Exploration. “The Toronto Stock Exchange has conditionally approved the listing of the company’s common shares upon implementation” of the [restructuring].”

That Pacific Exploration press release from September 26 is reprinted in full here:

Pacific Exploration & Production Corp. (the “Company”) is pleased to provide an update with respect to its previously announced plan of compromise and arrangement (the “Plan”) pursuant to the Companies’ Creditors Arrangement Act (Canada) in connection with its comprehensive restructuring transaction (the “Creditor/Catalyst Restructuring Transaction”).

To date, the Company has received and approved claims affected by the Creditor/Catalyst Restructuring Transaction in the amount of US$5,502,869,874 (the “Affected Claims”) consisting of US$4,254,956,647 of claims from holders (the “Noteholders”) of the Company’s senior unsecured notes (the “Notes”), US$1,232,627,877 of claims from lenders (the “Bank Lenders”) under the Company’s credit facilities and US$15,285,350 of claims from other creditors affected by the Plan (the “Other Affected Creditors” and, together with the Noteholders and Bank Lenders, the “Affected Creditors”). The amount of claims of Other Affected Creditors continues to be finalized and therefore the total amount of Affected Claims, and the distribution to Affected Creditors, is subject to change.

Under the Plan, Affected Creditors are entitled to receive their pro rata share of approximately 29,100,000 common shares of the Company (after giving effect to the share consolidation contemplated by the Plan, the “Affected Creditor Shares”) representing approximately 58.2% of the fully diluted common shares of the reorganized Company; provided that, subject to certain terms and conditions, Noteholders who signed and returned the Support Agreement in respect of the Creditor/Catalyst Restructuring Transaction, submitted a valid Application for Early Consent Consideration and otherwise complied with the terms of the Plan (“Early Consent Noteholders”) are entitled to receive, as additional consideration in exchange for their Affected Claims, their pro rata share of approximately 2.2% of the fully diluted common shares of the reorganized Company. This amount is to be allocated from the Affected Creditor Shares otherwise payable to the Noteholders.

In addition, Affected Creditors were entitled, subject to certain terms and conditions, to elect to receive, in lieu of their Affected Creditor Shares, cash at either a “Designated Rate” of US$16.00 per Affected Creditor Share (on a post consolidation basis) or, if accepted, such other “Offer Rate” above US$16.00 per Affected Creditor Share (on a post consolidation basis) that they could designate in US$0.10 increments (the “Cash Election”). Offer Rates up to and including US$26.00 per Affected Creditor Share (on a post consolidation basis) were ultimately accepted (the Designated Rate and such accepted Offer Rates, the “Acceptable Cash Rates”). For greater certainty, if an Affected Creditor designated an Offer Rate of US$26.10 or greater, they will not be receiving cash but will receive their proportion of Affected Creditor Shares.

Under the terms of the Plan, The Catalyst Capital Group Inc. (the “Plan Sponsor”) and certain other Noteholders (the “Equity Subscribers”) were required to subscribe for shares in the capital of the Company in order to fund the Cash Election at Acceptable Cash Rates.

Accordingly, subject to finalization of the Affected Claims, the Company expects that the Affected Creditor Shares or cash in lieu thereof pursuant to the Cash Election will be issued to Affected Creditors as follows:

Noteholders (Excluding any Early Consent Consideration)

Noteholders will receive for every US$100,000 of principal amount, in addition to any Early Consent Consideration they may be entitled to, either:

It is anticipated that such Affected Creditor Shares, or cash in lieu thereof, will be delivered through the facilities of The Depository Trust Company to each Noteholder’s intermediaries (such as the bank, broker or other intermediary that holds Notes on behalf of a Noteholder, herein referred to as an “Intermediary”) who in turn will deliver such Affected Creditor Shares or cash, as applicable, to the Noteholders pursuant to standing instructions and customary practices.

Noteholders Receiving Early Consent Consideration

In addition to any Affected Creditor Shares or cash in lieu thereof they would otherwise receive in their capacity as a Noteholder, Early Consent Noteholders will also receive for every US$100,000 of principal amount either:

It is anticipated that, pursuant to the instructions provided by a Noteholder in its Application for Early Consent Consideration, such Affected Creditor Shares will be delivered to such Noteholder (or its Intermediary) by Direct Registration System Advices and cash in lieu thereof will be delivered to such Noteholder (or its Intermediary) by wire transfer or cheque.

Bank Lenders and Other Affected Creditors

Bank Lenders and Other Affected Creditors will receive approximately 528.81 Affected Creditor Shares for every US$100,000 of Affected Claims or, if they validly participated in the Cash Election at an Acceptable Cash Rate, cash in an amount approximately equal to such creditor’s Applicable Cash Rate multiplied by such factor.

It is anticipated that, pursuant to instructions provided by a Bank Lender or Other Affected Creditor to PricewaterhouseCoopers Inc. (as monitor under the Plan), such Affected Creditor Shares will be delivered to such Bank Lender or Other Affected Creditor in certificated form and cash in lieu thereof will be delivered to such Bank Lender or Other Affected Creditor by wire transfer or cheque.

Subject to finalization of the Affected Claims, Affected Creditors have, pursuant to the Cash Election, validly elected to receive cash in the amount of approximately US$16,317,446 in lieu of approximately 925,619 Affected Creditor Shares and, accordingly, the Plan Sponsor and Equity Subscribers will subscribe for such number of shares to fund such amount.

In addition to the Affected Creditor Shares, the Company expects:

• to issue to holders of warrants (which warrants are exercised under the Plan) issued as part of the debtor-in-possession financing in connection with the Creditor/Catalyst Restructuring Transaction Financing (the “DIP Financing”), 6,250,000 common shares of the Company (after giving effect to the share consolidation contemplated by the Plan) representing approximately 12.5% of the fully diluted common shares of the reorganized Company;

• that the US$250 million (less an original issue discount) of funding provided by the Plan Sponsor as part of the DIP Financing will be exchanged for 14,650,000 common shares of the reorganized Company, representing approximately 29.3% of the fully diluted common shares of the reorganized Company; and

• that its common shares will be, in accordance with the terms of the Plan, consolidated on the basis of one post-consolidated share for each 100,000 common shares of the Company outstanding immediately prior to implementation of the Plan and any fractional common shares will be rounded down to the nearest whole number without consideration in respect thereof. Accordingly every person that holds fewer than 100,000 common shares of the Company will cease to be a shareholder of the Company following the implementation of the Plan.

The amount of Affected Claims continues to be finalized and therefore, notwithstanding anything contained herein, the distributions to Affected Creditors as set out in this press release are subject to change. We also caution that, owing to rounding, the number of Affected Creditor Shares or cash in lieu thereof actually received by Affected Creditors may not match the factors set out herein.

Shareholder Contact Information

Shareholders are reminded that any questions or concerns can be directed to the Company at [email protected].

Noteholder Contact Information

Noteholders with questions about the Plan are encouraged to contact Kingsdale Shareholder Services at 1-877-659-1821 toll-free in North America or call collect at 1-416-867-2272 outside of North America or by email at [email protected].