The preferred stock, which has a liquidation preference of $100 per share, will pay cumulative quarterly dividends initially at a rate of 15% per annum, payable at the option of the Company in additional shares of the preferred stock, shares of the Company's common stock (subject to the satisfaction of certain conditions) or cash (if allowed by the terms of the Company's then-existing debt instruments). The preferred stock is initially convertible into approximately 9.8 million shares of the Company's common stock, based on an initial conversion price (subject to adjustment) of $4.50 per share. The preferred stock will be redeemable, at the option of the holder, on December 1, 2011 or upon a change of control of the Company, at the liquidation preference plus all accumulated and unpaid dividends. The preferred stock includes a one-time reset of the dividend and conversion rate at July 1, 2007 in the event that neither the specified average production level nor the specified common stock trading price is achieved.
The private offering and the concurrent private placement generated total net proceeds to the Company of approximately $41.2 million. The Company intends to use the net proceeds for the continuation of its accelerated development program in the South Alibek Field and for working capital and general corporate purposes.
Transmeridian Exploration Incorporated is an independent energy company established to acquire and develop oil reserves in the Caspian Sea region of the former Soviet Union. The Company primarily targets fields with proved or probable reserves and significant upside reserve potential. Transmeridian Exploration currently has projects in Kazakhstan and southern Russia and is pursuing additional projects in the Caspian Sea region.
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