Rex Energy Corp. (NASDAQ:REXX) has entered into an exchange agreement with a fund managed by a certain holder, pursuant to which the holder agreed to exchange $43.5 million aggregate principal amount of the company's 1.00%/8.00% Senior Secured Second Lien Notes due 2020 for approximately 16.8 million shares of common stock.
With this transaction, total interest expense savings from the exchange will be approximately $11.1 million. The exchange is expected to close on or about July 25, 2016, at which time the Exchanged Notes will be cancelled.
"With a $43.5 million reduction in total debt and $11.1 million in savings on interest payments, this exchange represents another significant step in improving our balance sheet," said Tom Stabley, Rex Energy's president and CEO. "We have now executed multiple transactions since the end of the first quarter that have reduced our overall debt by approximately $84.0 million and created interest savings of over $22 million. We plan to pursue similar transactions to further improve our balance sheet and enhance our liquidity profile."
The move does improve the company’s financial condition, Stifel analysts said in a note following the announcement, but note the balance sheet remains challenged.
“We view the exchange, which provides some near-term interest expense relief, as a positive step toward improving the company's financial condition. However, our NAV estimate of ($1.00)/share (Figure 1), challenging well economics, and what remains a highly stressed balance sheet cause us to maintain our Sell rating,” the analysts wrote.
The exchange is being made in reliance on the exemption from registration provided by Section 3(a)(9) under the Securities Act of 1933, as amended.
Headquartered in State College, Pennsylvania, Rex Energy is an independent oil and gas exploration and production company operating in the Appalachian and Illinois Basins within the United States.