On Nov. 2, EXCO Resources Inc. (NYSE: XCO) was notified by the New York Stock Exchange (NYSE) that the company has regained compliance with the NYSE’s continued listing standards because the price of EXCO’s common shares was above $1 per share both on the last trading day of October and for the average share price over the 30 trading days preceding Oct. 30. EXCO has also entered into additional transactions as the company continues to enhance its balance sheet as part of its ongoing strategic improvement plan.
On Sept. 23, EXCO called a special meeting of shareholders for Nov. 16 for its shareholders to consider, among other things, a proposal to grant the board of directors the authority to effect a reverse share split and proportionally reduce the total number of outstanding common shares that are authorized for issuance. The proposal, if approved by the shareholders, would authorize the board to effect a reverse share split at a ratio of up to 1-for-10 common shares, with the decision, timing, and exact ratio of the reverse share split to be determined by the board in its sole discretion. The proposed reverse share split would affect all shareholders uniformly and would not affect any shareholder’s ownership percentage.
EXCO’s board continues to recommend that shareholders vote “for” the proposals to be acted upon at the special meeting. If approved by shareholders, the board would make a determination as to whether effecting the reverse share split and the authorized share reduction is in the best interests of the company and its shareholders. The board may elect to defer any decision on whether or not to effect a reverse share split.
EXCO has entered into agreements with certain unsecured noteholders pursuant to which the noteholders have agreed to become additional lenders for an aggregate amount of $109 million under the senior secured second lien term loan entered into by EXCO on Oct. 19 in exchange for the company repurchasing $252 million of the noteholders’ senior unsecured notes at an average price of 43% of principal amount. EXCO had previously exchanged senior unsecured notes at an average price of 51% of principal amount.
The exchange term loan bears interest at a rate of 12.50% per annum and has a five-year maturity. EXCO and the noteholders entered into agreements to repurchase $175 million of its 7.50% senior unsecured notes due 2018 (47% of the $374 million outstanding) and $76 million of its 8.50% senior unsecured notes due 2022 (26% of the $299 million outstanding). After the closing of the transactions, EXCO will have $199 million and $223 million, respectively, of the 7.50% and 8.50% senior unsecured notes outstanding.
The transactions further demonstrate EXCO’s focus on enhancing its balance sheet. On Oct. 26, EXCO closed on a series of transactions that enhanced the company’s liquidity and reduced debt that included issuing $591 million of 12.5% senior secured second lien term loans; repurchasing $577 million of unsecured notes for $291 million; and amending its credit agreement.
EXCO anticipates that the additional transactions will further strengthen its financial position and, when combined with the Oct. 26 transactions, will increase its financial flexibility to implement its strategic plan by reducing total debt by $413 million, or 27%; maintaining $125 million of junior lien debt capacity for future exchanges; reducing the principal amount of outstanding senior unsecured notes by $828 million, or 66%; reducing the nearest unsecured debt maturity, due in 2018, by $551 million, or 73%; extending weighted average debt maturity from 3.6 to 4.8 years, representing a 33% improvement; and improving forward cash flow by $304 million.
The transactions are expected to close on Nov. 4, subject to the satisfaction or waiver of customary closing conditions, and the senior unsecured notes repurchased will be canceled by the trustee following customary settlement procedures.
Credit Suisse Securities (USA) LLC acted as exclusive restructuring advisor to the company.