Avenue Capital acquires shares, notes of Connacher Oil and Gas

Funds affiliated with U.S. distressed investor Avenue Capital Group have acquired about 12.9 million common shares and about US$19.5 million principal amount of second lien convertible notes of Connacher Oil and Gas Ltd, a Calgary energy company active in the production and sale of bitumen. The deal is linked with Connacher’s restructuring and recapitalization plan, which exchanges about $1 billion of company debt for shares, among other measures. As a result of its acquisition of common shares, Avenue is expected to own 45.8 percent of total shares outstanding.

PRESS RELEASE

Avenue Capital Management II, L.P. Announces Ownership in Connacher Oil and Gas Limited

TORONTO, May 8, 2015 /CNW/ – On May 8, 2015, certain funds (“Funds”) managed by Avenue Capital Management II, L.P. (“Avenue”) acquired ownership of 12,953,255 common shares (“Common Shares”) of Connacher Oil and Gas Limited (“Connacher”) and US$19,461,584 principal amount of 12% second lien convertible notes of Connacher due August 31, 2018 (the “New Convertible Notes”) pursuant to the implementation of a plan of arrangement under Section 192 of the Canada Business Corporations Act (the “Plan of Arrangement”). The Common Shares were acquired upon conversion of certain notes issued by Connacher which were owned by the Funds prior to the implementation of the Plan of Arrangement (the “Conversion”). The New Convertible Notes were acquired pursuant to an offering by Connacher of an aggregate of US$35 million principal amount of New Convertible Notes pursuant to the Plan of Arrangement.

The New Convertible Notes are convertible into Common Shares at a conversion price of US$0.53 per share. The terms of the indenture governing the New Convertible Notes provides that no holder of the New Convertible Notes may convert, through one or more transactions, an amount of New Convertible Notes into Common Shares of Connacher if after such conversion such holder (together with its affiliates and persons acting jointly or in concert with the holder or its affiliates) would own or control in excess of 49.9% of the Common Shares (the “49.9% Ownership Restrictions”). The 49.9% Ownership Restrictions are also contained in By-Law No. 1 of Connacher.

The Plan of Arrangement also included a consolidation of Connacher’s previously issued and outstanding Common Shares on the basis of one new Common Share for every 800 existing Common Shares (the “Consolidation”).

Following the implementation of the Plan of Arrangement (including the Consolidation), Connacher has disclosed that there will be an aggregate of approximately 28,309,390 Common Shares issued and outstanding.

Following the Plan of Arrangement, the Funds own 12,977,496 Common Shares and US$19,461,584 principal amount of New Convertible Notes. The Common Shares owned by the Funds constitute approximately 45.8% of the total number of Common Shares outstanding. Assuming the conversion of all of the New Convertible Notes owned by the Funds into an additional 36,720,117 Common Shares, and no other conversions of New Convertible Notes, the Funds would then own approximately 76.4% of the total number of Common Shares outstanding (subject to the application of the 49.9% Ownership Restrictions). Assuming the conversion of all of the New Convertible Notes by all holders thereof (including the Funds), the Funds would then own approximately 52.7% of the total number of Common Shares outstanding (subject to the application of the 49.9% Ownership Restrictions).

Avenue controls the Common Shares and New Convertible Notes described in this news release on behalf of the Funds for investment purposes. Depending on market conditions and other factors that Avenue may deem material to its investment decisions, Avenue may, on behalf of the Funds, in the future acquire additional Common Shares, New Convertible Notes, or other securities or derivative securities related to the Common Shares or New Convertible Notes, in the open market or in privately negotiated purchases or otherwise. Avenue may also, on behalf of the Funds, depending on then-current circumstances, dispose of all or a portion of the Common Shares, New Convertible Notes, or other securities or derivative securities related to the Common Shares or New Convertible Notes, in one or more open-market or privately negotiated transactions, in each case to the extent then permitted by applicable laws.

SOURCE Avenue Capital Management II, L.P.
For further information: Further information (including a copy of the report to be filed with Canadian securities regulators in connection with the Plan of Arrangement) can be obtained by contacting: Todd Fogarty, 212-521-4800, Avenue Capital Management II, L.P., 399 Park Avenue, 6th Floor, New York, NY 10022, USA

Photo courtesy of Connacher Oil and Gas Ltd