Goodrich Petroleum Corp. (NYSE: GDP) has entered into separate, privately negotiated exchange agreements under which it will retire $158.2 million in an aggregate original principal amount of its outstanding 8.875% senior notes due 2019 in exchange for its issuance of $75 million in an aggregate original principal amount of its 8.875% second lien senior secured notes due 2018.
In addition, certain holders of the existing notes who exchange into the new second lien notes will receive warrants to acquire 6 million shares of the company's common stock at an exercise price of $1 per share, which are exercisable on a cashless basis.
Following these transactions, approximately $116.8 million in an aggregate original principal amount of the existing notes will remain outstanding with terms unchanged. The exchange is expected to close on Oct. 1.
In conjunction with the exchange, the company expects, subject to customary closing conditions, to enter into new amendments to its second amended and restated credit agreement and its existing 8.00% second lien senior secured notes due 2018 to allow for the contemplated transaction and to further allow for the ability for the company to incur a new third lien debt basket to be used for additional exchanges of existing notes in an amount up to $50 million.
Goodrich also expects that its borrowing base under its second amended and restated credit agreement will be reduced from $105 million to $75 million in connection with such new amendment. As a result of these exchange transactions, Goodrich has reduced its outstanding indebtedness by approximately $83.2 million, which will reduce annual interest expense going forward by $7.4 million.
Many terms of the new second lien notes are the same as the company's current 8.00% second lien senior secured notes due 2018 including the ranking, security, and final maturity of the new second lien notes. Goodrich has the right to redeem the new second lien notes on or after March 15, 2017, at a price equal to 100% of the principal amount thereof, plus accrued but unpaid interest on the original principal amount thereof.
Under the terms of the warrant agreement, the second lien notes and the warrants will not be separately transferable for 60 days. At such time, the warrants will become convertible on a cashless basis based on an exercise price of $1, as set forth in the warrant agreement. Any warrants not exercised in 10 years will expire.