Exco Resources Bonds Tumble Most Since Issuance After CEO Proposes Buyout
Exco Resources Inc.’s bonds declined to the lowest since they were issued in September after the oil and natural gas producer said today its chief executive officer offered to take the company private.
Exco’s $750 million of 7.5 percent notes due in September 2018 fell as much as 6.7 cents to 92 cents on the dollar, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The Dallas-based company’s debt traded at 95.4 cents on the dollar at 12:12 p.m. in New York, Trace data show.
CEO Douglas H. Miller is offering to pay $20.50 a share in cash for all of Exco’s stock that he doesn’t already own and may use debt financing to take the company private in a $4.36 billion transaction. While the company’s notes include a provision that allows bondholders to force Exco to redeem them at 101 cents on the dollar in the event of a takeover, the clause won’t apply if the company is acquired by a group led by Miller, according to Covenant Review LLC, a research firm that analyzes creditor protections.
“If they do this with a lot of leverage, then not having the downside protection of the put becomes a bigger problem,” said Holt Goddard, an analyst at Covenant Review in New York.
Dallas billionaire T. Boone Pickens, Oaktree Capital Management LP and Ares Management LLC, three of Exco’s four largest shareholders with a combined 27.4 percent stake as of June 30, are interested in joining Miller’s bid, he said in a letter released today by the company.
Miller said he plans to reinvest a “significant portion” of his stake in the company to finance the acquisition.
“The remaining funds necessary to consummate the transaction would come from senior management, outside investment partners and, as needed, third party debt financing,” Miller wrote in the letter.
Stephen Smith, a spokesman for Exco, didn’t immediately return a phone call seeking comment.
To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net.
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.
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