• Company to issue $591 million in senior secured 2nd-lien loans
  • Oil, gas producer seeks flexibility amid slump in commodities

Exco Resources Inc. is overhauling its corporate-debt structure with a series of transactions it says will increase its financial flexibility.

The Dallas-based oil and gas producer is planning to issue $591 million in secured second-lien term loans to reduce its total net debt by about 18 percent, or $270 million, the company said in a statement.

The company will buy back $577 million of senior unsecured notes from certain investors at 51 percent of face value. In return, noteholders have agreed to make a $291 million, five-year second-lien loan with a 12.5 percent coupon and a five-year maturity to Exco.

Exco will repurchase $376 million of its 7.5 percent senior unsecured notes due 2018, which last traded at about 26 cents on the dollar on Oct. 16, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority; and approximately $201 million of its 8.5 percent senior unsecured notes due 2022, which traded at 24 cents at 9:48 a.m. today in New York.

The company also receive a $300 million loan from Fairfax Financial Holdings Ltd. on the same terms as the noteholder loan.

The company, which said cash flow would be improved by $146 million, had its borrowing base reduced to $375 million and debt covenants loosened. Moody’s cut Exco’s credit rating three notches to Caa1 in August, as falling gas prices weighed on the company’s credit profile and liquidity.

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