PetroQuest Energy (ticker: PQ) has taken steps to enhance the liquidity of the company and shore up the balance sheet. The company announced that it is commencing an exchange offer for its outstanding 10% senior notes due 2017, and outstanding second lien senior secured notes due 2021. The noteholders have the option of receiving the New Notes and/or common stock. PetroQuest plans to issue up to $280 million in New Notes and issue 3,517,000 shares of common stock as part of the exchange offer.
The New Notes will have substantially identical terms to the 2021 Notes, except that the interest on the New Notes may be paid, at the option of the company, at the rate of 1.00% per annum in cash and 9.00% per annum in kind for the first three interest payments after issuance and is otherwise payable in cash at the rate of 10% per annum.
In connection with the exchange offer, PetroQuest also entered into a new borrowing commitment of $50 million. The credit facility will be originated following the results of the exchange offer and provide additional liquidity for the company. The new facility will replace the company’s existing credit facility, which the borrowing base is currently $0.
The new arrangement will accomplish two things for PetroQuest, it will enhance liquidity and push back the maturity of notes. The exchange offer for 2017 notes will retire the old notes and replace them with a new maturity date in 2021. The equity for debt portion of the exchange will replace existing debt with equity and reduce the overall leverage of the company.
