American Energy – Utica LLC (AEU), an affiliate of American Energy Partners LP (AEP-LP), has closed on its offering of $750 million of seven-year 3.5% convertible subordinated notes that priced last week. The offering was upsized from an initial amount of $500 million.
The notes are convertible upon the first qualified, registered public offering of AEU into shares of the same class of common stock that are sold in that offering. Upon conversion, holders of the notes will receive a number of shares equal to the greater of $750 million divided by a conversion price equal to an agreed discount to the public offering price, and 15% of the equity value of AEU at the time of the public offering, in each case subject to certain adjustments.
AEU has also entered into an amendment of its senior secured credit facility, which is led by GSO Capital Partners, to provide for $500 million of incremental term loan borrowings that increases AEU's total borrowing capacity to $950 million. AEU intends to use the net proceeds from the offering and the incremental term loan borrowings to facilitate the funding of its pending leasehold acquisitions in the southern Utica shale play and its planned capital expenditures for its drilling and development program.
On Oct. 9, 2013, AEU announced it had raised $1.2 billion in private equity commitments from the Energy & Minerals Group and additional equity providers, including First Reserve Corp. This announcement brings the total capital raised by AEU over the past five months to approximately $2.9 billion.
Underwriters for the notes offering were Jefferies, Citigroup and Goldman, Sachs & Co. Legal advisor for the issuer was Sullivan & Cromwell LLP and for the underwriters was Latham & Watkins LLP.