American Energy - Permian Basin, LLC Announces Private Exchange Offers for Any and All of Its Outstanding First Lien Notes Due 2020, Second Lien Notes due 2020, and Senior Notes Due 2019, 2020 and 2021 and related Consent Solicitations

HOUSTON, May 3, 2019 /PRNewswire/ -- American Energy – Permian Basin, LLC (f/k/a Sable Permian Resources Land, LLC) (the "Company") today announced that it and its wholly-owned subsidiary, AEPB Finance Corporation (f/k/a SPR Finance Corporation), as co-issuer ("AEPB Finance" and, together with the Company, the "Issuers"), have launched exchange offers (the "Exchange Offers") to exchange any and all of the Issuers' outstanding 13.000% Senior Secured First Lien Notes due 2020 (the "Existing First Lien Notes") for the Issuers' new 13.000% Senior Secured First Lien Notes due 2023 (the "New First Lien Notes"), any and all of the Issuers' outstanding 8.000% Senior Secured Second Lien Notes due 2020 (the "Existing Second Lien Notes") for the Issuers' new 10.000% Senior Secured Second Lien Notes due 2023 (the "New Second Lien Notes"), and any and all of the Issuers' outstanding Floating Rate Senior Notes due 2019 (the "Existing 2019 Notes"), 7.125% Senior Notes due 2020 (the "Existing 2020 Notes") and 7.375% Senior Notes due 2021 (the "Existing 2021 Notes" and, together with the Existing 2019 Notes and Existing 2020 Notes, the "Existing Senior Notes" and the Existing Senior Notes, together with the Existing First Lien Notes and the Existing Second Lien Notes, the "Old Notes") for the Issuers' new 10.000%/12.000% Senior Secured Third Lien PIK Toggle Notes due 2024 (the "New PIK Toggle Third Lien Notes" and, together with the New First Lien Notes and the New Second Lien Notes, the "New Notes"), for the applicable consideration set forth in the table below.

The Company has engaged in discussions with certain holders of Old Notes (the "Significant Noteholders"), which collectively held, as of May 3, 2019, approximately (i) $1.17 billion (approximately 87% of the outstanding principal amount) aggregate principal amount of the Existing Senior Notes, (ii) $387 million (approximately 84% of the outstanding principal amount) aggregate principal amount of the Existing First Lien Notes and (iii) $250 million (approximately 86% of the outstanding principal amount) aggregate principal amount of the Existing Second Lien Notes. The Company expects, but cannot guarantee, that the Significant Noteholders will enter into a support agreement and consent (a "Support Agreement") with the Company, whereby the Significant Noteholders will agree to tender all of their Old Notes in the Exchange Offers and consent to the proposed amendments in the Consent Solicitations (as defined below), subject to certain terms and conditions.

Additionally, subject to the satisfaction of all conditions to the Exchange Offers, including, but not limited to, that at least 95% of the aggregate principal amount of each series of the Old Notes are validly tendered and not validly withdrawn in the Exchange Offers (the "Minimum Tender Condition"), immediately prior to the issuance of the New Notes in the Exchange Offers, Sable Permian Resources, LLC ("SPR"), the indirect parent of the Company, will contribute all of its oil and gas leases and its interests in all of its oil and gas wells (the "SPR Assets") to the Company (such contribution, the "SPR Dropdown").  Contemporaneously with the issuance of the New Notes in the Exchange Offers, the Company will contribute all of its oil and gas properties, together with the SPR Assets received in the SPR Dropdown, to AEPB Acquisition Company, LLC (f/k/a Sable Acquisition Company, LLC) ("AcqCo"), its wholly owned subsidiary (the "Company Dropdown" and, together with the SPR Dropdown, the "Asset Contributions").

After giving effect to the Asset Contributions as of December 31, 2018, the Company's leasehold position would increase by 135% to approximately 144,700 gross (127,600 net) acres across the Midland Basin and will increase the Company's proved reserves by 63% to approximately 154.4 mmboe. The Company's April 2019 average net production volume after giving effect to the Asset Contributions will be 43.1 mboe per day, compared to the Company's April 2019 average net production volume of 26.5 mboe per day without giving effect to the Asset Contributions. Additionally, in the event the Minimum Tender Condition is satisfied and the Exchange Offers are consummated, SPR will contribute (the "Equity Contribution" and, together with the Asset Contributions, the "Contributions") $150 million in cash in exchange for common equity in the Company.

The Contributions are not expected to be consummated unless the Exchange Offers are also consummated. The Contributions are conditioned on the substantially concurrent consummation of the Exchange Offers and, similarly, the Exchange Offers are conditioned on the substantially concurrent consummation of the Contributions.

If a Support Agreement is executed, the Company anticipates that it will be subject to certain restrictions under such a Support Agreement, including that the Minimum Tender Condition cannot be waived without the consent of SPR and Significant Noteholders holding a majority of the aggregate principal amount of each class of Old Notes collectively held by the Significant Noteholders. In the event the Minimum Tender Condition is not satisfied, the Company reserves the right, subject to any required consent of the Significant Noteholders, to make certain amendments to the Exchange Offers and enter into related transactions which may include, but are not limited to, any one or more of the (i) issuance by the Company of new fourth lien convertible notes to SPR as consideration for the SPR Dropdown and cash investment and (ii) issuance of notes structurally senior to, but on the same terms and in the same aggregate principal amount as, the New Notes by AEPB Finance and a newly-formed subsidiary of the Company as co-issuers, and the concurrent issuance by the Company of an agreed upon amount of new first lien notes to SPR as consideration for the SPR Dropdown and/or cash investment.  If the Minimum Tender Condition is not satisfied and the Company does not consummate the Exchange Offers, the Company expects that it and certain of its subsidiaries, other than AcqCo and its subsidiaries, will file for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code.  The Company has held preliminary discussions with certain of its Significant Noteholders regarding filing a bankruptcy petition and expects to continue those discussions during the Exchange Offers. The Company is evaluating and will continue to explore strategic alternatives to the Exchange Offers, including filing a voluntary petition for Chapter 11 bankruptcy relief, in consultation with its board of managers, including a special committee of independent board members.  The Company has retained Greenhill & Co. to, among other things, advise on such strategic alternatives, including any bankruptcy filing.

Contemporaneously with the consummation of the Exchange Offers and Asset Contributions, and as a condition of the Exchange Offers and Asset Contributions, AcqCo will enter into a new senior secured reserve based lending facility with commercial lenders engaged in lending in the oil and gas industry (the "New AcqCo RBL Facility") and will terminate its existing revolving credit facility. JPMorgan Chase Bank, N.A. has agreed pursuant to a commitment letter provided to SPR, which SPR has the right, and, as a condition to initial borrowing, is required to assign to AcqCo, to provide 100% of the New AcqCo RBL Facility. Access to the New AcqCo RBL Facility is also conditioned on, among other things, the consummation of the Exchange Offers without any variations, waivers, modifications or consents materially adverse to the interests of the lenders under the New AcqCo RBL Facility (and the commitment letter provided by JPMorgan Chase Bank, N.A. to SPR provides that the exchange of the Old Notes pursuant to the Exchange Offers in an amount below a certain threshold is materially adverse to the interests of the lenders under the New AcqCo RBL Facility).  There are no significant conditions to the closing of the New AcqCo RBL Facility other than those set forth above.  The New AcqCo RBL Facility is expected to have an initial borrowing base of $700 million, subject to semi-annual redeterminations.  In connection with the closing of the Exchange Offers, the commitment will be assigned from SPR to AcqCo, who will be the borrower under the New AcqCo RBL Facility. The New AcqCo RBL Facility is expected to mature, and the commitments thereunder are expected to terminate, on the date that is the earlier of (a) five years after the closing date of the New AcqCo RBL Facility and (b) 91 days prior to the earliest maturity date of any senior secured or unsecured notes of the Company, including any Old Notes not exchanged in the Exchange Offers (but excluding such Old Notes if the aggregate amount of Old Notes outstanding is less than a certain threshold).

The Company failed to make its scheduled interest payment on the Existing Senior Notes that was due on May 1, 2019 in the aggregate amount of $46.1 million. Failure to make such payment within a 30-day grace period following May 1, 2019 will result in an event of default under the Company's existing indentures. If the Exchange Offers are not consummated, substantial doubt exists with respect to the Company's ability to make such interest payment on the Existing Senior Notes within the 30-day grace period or to make the next scheduled interest payment on the Old Notes and to continue as a going concern.  Even if the Exchange Offers are consummated, there can be no assurance that the Company's liquidity and financial condition will improve or that the Company will avoid becoming subject to a bankruptcy or similar proceeding.

Exchange Offers

The Old Notes and other information relating to the Exchange Offers are set forth below.

(1) As of May 3, 2019.
(2) Per $1,000 principal amount of Old Notes that are accepted for purchase.
(3) Excludes accrued and unpaid interest, if any, which tendering holders will receive as provided herein.  If New Notes are issued in exchange for the Old Notes on the Early Settlement Date (as defined below), Eligible Holders (as defined below) who receive New Notes in exchange for Old Notes on the Final Settlement Date (as defined below) will receive New Notes that will have an embedded entitlement to interest ("pre-issuance interest") for the period from and including the Early Settlement Date to, but not including, the Final Settlement Date. As a result, the cash payable for accrued interest on the Old Notes exchanged on the Final Settlement Date will be reduced by the amount of any pre-issuance interest on the New Notes issued on the Final Settlement Date.

Additional Information

The Issuers will pay, in cash, accrued and unpaid interest, if any, on the Old Notes exchanged for New Notes up to, but not including, the applicable settlement dates for the Exchange Offers, except that the cash payable for accrued interest on the Old Notes exchanged on the Final Settlement Date will be reduced by the amount of any pre-issuance interest that will have already accrued on the New Notes issued on the Final Settlement Date.

The Exchange Offers are conditioned upon certain conditions as more fully described in the confidential offering memorandum and consent solicitation statement (the "Offering Memorandum") and the related letter of transmittal, including, but not limited to, the Minimum Tender Condition, and the Exchange Offers, either as a whole, or with respect to one or more series of Old Notes, may be amended, extended, terminated or withdrawn for any reason prior to 5:00 p.m., New York City time, on May 16, 2019, but not thereafter, subject to limited exceptions, unless extended, as described in the Offering Memorandum, including based on the acceptance rate and outcome of the Exchange Offers or failure to satisfy any condition to the Exchange Offers.

In connection with the Exchange Offers, the Issuers will solicit consents (the "Consent Solicitations") to amend the indentures governing the Old Notes (the "Old Notes Indentures"). The proposed amendments, which will become effective with respect to each series of Old Notes (or, with respect to the Existing Senior Notes, all three series taken together as one class) for which participation in the related Exchange Offer exceeds 50% (and, with respect to the release of liens on all of the collateral securing the Existing First Lien Notes and the Existing Second Lien Notes, as described below, exceeds 66 2/3%), will eliminate substantially all restrictive covenants, certain events of default and certain other provisions contained in the Old Notes Indentures and, in the case of the indentures governing the Existing First Lien Notes and the Existing Second Lien Notes, release the liens on all of the collateral securing the Existing First Lien Notes and the Existing Second Lien Notes.  Following consummation of the Exchange Offers and the Consent Solicitations, and upon effectiveness of the proposed amendments, any holders of the Existing First Lien Notes and Existing Second Lien Notes that do not participate in the Exchange Offers would rank pari passu with any Senior Unsecured Notes that do not participate.   The consummation of the Consent Solicitations is subject to the satisfaction or waiver of the conditions to the Exchange Offers set forth in the Offering Memorandum.  In the event of a termination of the Exchange Offers and the Consent Solicitations, the Issuers will not accept consents for any Old Notes, the proposed amendments will not become operative and such consents will be deemed voided.

Holders who validly tender (and not validly withdraw) their Old Notes at or prior to 5:00 p.m., New York City time, on May 16, 2019, unless extended (the "Early Tender Time"), will be eligible to receive the applicable Total Consideration as set forth in the table above.  The "Early Settlement Date" will be as soon as practicable after the Early Tender Time (and is expected to be on or before the fifth business day after the Early Tender Time) and will apply to all Old Notes validly tendered (and not validly withdrawn) in the Exchange Offers as of the Early Tender Time.  For each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) after the Early Tender Time but by 12:00 midnight, New York City time, on May 31, 2019, unless extended (the "Expiration Time"), holders of Old Notes will not be eligible to receive the applicable Total Consideration and, accordingly, will only be eligible to receive the applicable Exchange Consideration as set forth in the table above.  The "Final Settlement Date" will be as soon as practicable after the Expiration Time.

The New Notes will be issued pursuant to indentures, each by and among the Issuers, the guarantors named therein and Wilmington Trust, National Association, as trustee.  The New First Lien Notes will bear interest at an annual rate of 13.000%, and will be payable on May 1 and November 1 of each year, commencing on November 1, 2019. The New First Lien Notes will mature on November 1, 2023. The New Second Lien Notes will bear interest at an annual rate of 10.000%, and will be payable on May 1 and November 1 of each year, commencing on November 1, 2019. The New Second Lien Notes will mature on November 1, 2023. The New PIK Toggle Third Lien Notes will bear interest, at the Company's option, in cash at an annual rate of 10.000% or by increasing the aggregate principal amount of the outstanding New PIK Toggle Third Lien Notes or by issuing additional New PIK Toggle Third Lien Notes on the same terms and conditions as the New PIK Toggle Third Lien Notes offered hereby ("PIK Interest") at an annual rate of 12.000% until November 1, 2020 and will bear interest in cash thereafter at an annual rate of 10.000%.  Interest on the New PIK Toggle Third Lien Notes will be payable on May 1 and November 1 of each year, commencing on November 1, 2019. The New PIK Toggle Third Lien Notes will mature on November 1, 2024.

The New First Lien Notes will be guaranteed, jointly and severally, on a senior first lien secured basis by each of the Company's direct and indirect subsidiaries that in the future guarantee certain of either the Company's or any guarantor's other indebtedness. The New First Lien Notes will be secured by first priority perfected liens on substantially all of the Company's and any guarantors' assets, subject to certain exceptions. The New Second Lien Notes will be guaranteed, jointly and severally, on a senior second lien secured basis by each of the Company's direct and indirect subsidiaries that in the future guarantee certain of either the Company's or any guarantor's other indebtedness. The New Second Lien Notes will be secured by second priority perfected liens on substantially all of the Company's and any guarantors' assets, subject to certain exceptions. The New PIK Toggle Third Lien Notes will be guaranteed, jointly and severally, on a senior third lien secured basis by each of the Company's direct and indirect subsidiaries that in the future guarantee certain of either the Company's or any guarantor's other indebtedness. The New PIK Toggle Third Lien Notes will be secured by third priority perfected liens on substantially all of the Company's and any guarantors' other assets, subject to certain exceptions. On the issue date of the New Notes, the Issuers' assets will solely consist of the outstanding equity interest in AcqCo and certain deposit accounts of the Issuers.

The Company has the right to waive any condition to the Exchange Offers subject to applicable law and any restrictions imposed by any Support Agreement that it may enter into with the Significant Noteholders.

General

The issuance of the New Notes will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws. The New Notes are being offered and issued only (1) in the United States, to holders of the Old Notes that are "qualified institutional buyers" as defined in Rule 144A under the Securities Act, and (2) outside the United States, to holders of the Old Notes that are (i) not U.S. persons in reliance upon Regulation S under the Securities Act and (ii) "non-U.S. qualified offerees" as defined in the Offering Memorandum (each such holder, an "Eligible Holder"). Accordingly, the New Notes will be subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and other applicable securities laws, pursuant to registration or exemption therefrom.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering, solicitation or sale would be unlawful. The offering documents will be distributed only to holders of the Old Notes that complete and return a letter of eligibility at www.dfking.com/sable confirming that they are Eligible Holders for the purposes of the Exchange Offers. D.F. King & Co., Inc. is acting as the Exchange Agent and Information Agent for the Exchange Offers. Requests for the offering documents from Eligible Holders may be directed to D.F. King & Co., Inc. at (212) 269-5550 (for brokers and banks), (800) 549-6697 (for all others), or by email to [email protected].

Neither the Issuers, their respective governing boards nor any other person makes any recommendation as to whether the holders of the Old Notes should exchange their notes, and no one has been authorized to make such a recommendation. Holders of the Old Notes must make their own decisions as to whether to exchange their notes, and if they decide to do so, the principal amount of the notes to exchange.

About American Energy – Permian Basin, LLC

American Energy – Permian Basin, LLC is an independent oil and natural gas company focused on the acquisition, development and production of unconventional oil and natural gas reserves in the Wolfcamp Shale play in the Southern Midland Basin within the Permian Basin of West Texas.

Forward-Looking Statements

The information in this press release includes "forward-looking statements." All statements, other than statements of historical fact included in this press release, regarding the Company's strategy, future operations, financial position, estimated revenues and losses, projected production, projected costs, prospects, plans and objectives of management, are forward-looking statements. When used in this press release, the words "could," "believe," "anticipate," "intend," "estimate," "expect," "guidance," "forecast" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on the Company's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.  These forward-looking statements are based on management's current beliefs, based on currently available information, as to the outcome and timing of future events, which may differ from actual outcomes due to, among other things: risks associated with the pending Asset Contributions, including increased corporate and operating expenses and failure to realize the expected benefits of those transactions; failure, difficulties and delays in meeting conditions required for closing the pending Asset Contributions; the volatility of oil, natural gas and NGL prices or a prolonged period of low oil, natural gas or NGL prices; uncertainties about, or revisions to, the Company's estimated oil, natural gas and NGL reserves; the Company's ability to discover, estimate, develop and replace oil, natural gas and NGL reserves; weakness in economic conditions and uncertainty in financial markets, including the availability of credit and access to existing lines of credit; changes in domestic and global production, supply and demand for oil, natural gas and NGLs; operating hazards and difficulties inherent in the exploration and production of oil and natural gas; the Company's ability to generate or secure sufficient cash to pay fixed obligations, fund the Company's capital requirements and generate future profits; the Company's ability to control capital and operating expenditures; the Company's ability to execute the Company's financial and operational strategies, including, but not limited to, the Company's hedging strategies; the Company's ability to manage growth, successfully identify and consummate strategic acquisitions at purchase prices that are accretive to the Company's financial results, and successfully integrate acquired businesses, assets and properties; the Company's ability to avoid material legal or environmental liabilities; the impact of seasonal weather conditions on the Company's operations; the Company's ability to address actual or perceived conflicts of interest between the Company's interests and those of the Company's directors and officers and the Company's Sponsors; the Company's ability to service interest on the Company's indebtedness; the Company's ability to satisfy the covenants in the Company's debt instruments and agreements; the Company's ability to meet the Company's plans, objectives, expectations and intentions; and the Company's ability to recognize and mitigate other risks to the Company's planned objectives. While the Company makes these statements and projections in good faith, neither the Company nor the Company's management can guarantee that anticipated future results will be achieved.  The Company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the Company, whether as a result of new information, future events, or otherwise.

SOURCE American Energy - Permian Basin, LLC

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