Denbury Lenders Said Fighting Swap to Cut $2.85 Billion Debt

An effort by oil producer Denbury Resources Inc. to rein in $2.85 billion of debt is meeting resistance from bondholders who say it would saddle them with losses while giving them little in exchange.

Some lenders to the Plano, Texas-based company are opposing a debt exchange in which the company is asking investors in its subordinated debt to swap some of their holdings for new unsecured bonds, according to people with knowledge of the matter who asked not to be identified because the information isn’t public.

Research firm Covenant Review has advised bondholders that it’s a bad deal, saying that it would require them to lock in losses while leaving open the possibility for future exchanges with other bondholders that could jump over them in the repayment order. There are no meaningful restrictions on additional secured debt, according to Covenant Review, which tracks investor protections in new debt pacts.

“The proposed terms are completely inappropriate, particularly in a stressed exchange environment,” said Scott Josefsberg, an analyst at Covenant Review, in an interview.

Ross Campbell, a manager of investor relations at Denbury, didn’t respond to phone calls or an e-mail seeking comment.

Deadline Extended

Denbury, which had promised 65 cents on the dollar for investors willing to carry out the deal by the early-exchange deadline of Jan. 7, extended that to Jan. 20. The company hasn’t said how many holders have tendered their securities so far.

Unlike most oil companies that drill for untapped petroleum sources, Denbury produces crude by scavenging the bottoms of decades-old fields for reserves left behind by previous explorers. The company uses carbon dioxide to coax the stubborn remnants of oil out of the rocks.

The exchange would help the company rein its indebtedness after a year when about 75 percent of its stock-market capitalization was wiped out. Denbury shares fell 8.6 percent Monday to $1.49, giving it a market cap of around $530 million. Analysts expect the oil producer’s sales to slide to $1.4 billion from $2.4 billion as recently as 2014, according to data compiled by Bloomberg.

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