TXCO Enters Private Placement, Exchange of Existing Preferred Stock

TXCO Resources Inc. has entered into agreements related to the private placement of $20 million, or 20,000 shares, of its Series E Convertible Preferred Stock, convertible into TXCO common stock at $17.36 per share. In addition, it announced that in connection with the private placement it has agreed to exchange its shares of Series C Convertible Preferred Stock, which were issued in a private placement in November 2007, for shares of Series D Convertible Preferred Stock. The shares of Series D Preferred Stock are convertible into TXCO common stock at $14.48 per share, the same conversion price as the Series C Convertible Preferred Stock. Closing and funding are expected to occur on or before March 4, 2008.

"TXCO currently has high-potential growth catalysts and this transaction will help us further expand our growth plans on an opportunistic basis," said Chairman and CEO James E. Sigmon. "The funds will complement our previously announced plans to accelerate activity this year on the Pearsall shale gas resource play, San Miguel oil sands project and Glen Rose Porosity oil play in our core Maverick Basin area. We also plan to expedite drilling in TXCO's East Texas Fort Trinidad Field, where we're targeting the Glen Rose gas shoals. We remain confident that we will be successful in one or more of these prospects so we have also included a convertible hedge overlay to reduce dilution to our current TXCO stockholders."

The Company intends to use the net proceeds from the sale of the Series E Convertible Preferred Stock to complement its 2008 CAPEX drilling program. In addition, TXCO may use the proceeds in the short term to repay certain outstanding indebtedness, and to pay expenses of the offering and the cost of the convertible hedge transactions discussed below, as well as other general corporate and working capital purposes.

Under the transaction documents, purchasers of the Series E Convertible Preferred Stock are entitled to, among other things, dividends of 6.0 percent per annum and the holders of Series D Convertible Preferred Stock are entitled to, among other things, dividends of 6.5 percent per annum. The conversion price for the Series D Convertible Preferred Stock is $14.48 per share. No fees will be paid for the exchange of Series C for Series D.

The conversion price for the Series E Convertible Preferred Stock is $17.36 per share. Subject to certain terms and conditions, the buyers may purchase up to an additional $30 million of the Series D Preferred Stock by delivering notice to the Company no later than March 20, 2008 (or, at the Company's option, no later than May 20, 2008).

The Company will register the shares of common stock issuable on conversion of the Series D Convertible Preferred Stock and Series E Convertible Preferred Stock with the Securities and Exchange Commission at a specified future date.

In connection with the private placement, TXCO also entered into a convertible hedge transaction, which increases the effective conversion price on the Series E Convertible Preferred Stock to $21.71 per share. These transactions include a purchased call option and sold call option. The Company will pay for the convertible hedge using a portion of the net proceeds of the Series E Convertible Preferred Stock offering.

Details regarding the private placement, the exchange, the terms of the Series D Convertible Preferred Stock and Series E Convertible Preferred Stock, and the convertible hedge transactions are more fully discussed in a Form 8-K, which the Company is filing with the Securities and Exchange Commission later today.

Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE


Most Popular Articles


Brent Crude Oil : $56.86/BBL 0.76%
Light Crude Oil : $50.66/BBL 0.21%
Natural Gas : $2.959/MMBtu 0.30%
Updated in last 24 hours