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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 29, 1999
MICHAEL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Texas 333-52263* 76-0510239
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
13101 Northwest Freeway, Suite 320 77040
Houston, Texas
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 895-0909
* The Commission File Number refers to a Form S-4 Registration Statement filed
by the Registrant under the Securities Act of 1933 which was declared effective
on July 22, 1998.
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Item 5. Other Events
On June 29, 1999, representatives of Michael Petroleum Corporation (the
"Company") and its financial advisor met with certain holders of the Company's
$135 million 11 1/2% Senior Notes due 2005 (the "Senior Notes") regarding the
restructuring of the Company's senior indebtedness. As previously announced,
the Company's financial advisor had been engaged in April 1999 to seek financial
restructuring alternatives and had been engaged in preliminary discussions with
Noteholders regarding these alternatives.
As previously disclosed in the Company's Form 10-Q for its fiscal quarter ended
March 31, 1999, the Company currently lacks the liquidity and capital resources
necessary to fund its operations and maintain and grow its production revenues
and proved reserve base. The Company has no borrowing capacity under its Credit
Facility with Christiania Bank og KreditKasse due to borrowing base reductions
effective March 31, 1999, and is currently paying the default rate of interest
under the Credit Agreement. The Company is currently negotiating an amendment
to its Credit Agreement with Christiania, but no assurances can be made that any
amendment or any waivers will be forthcoming and in any event, it is unlikely
that additional borrowings from Christiania will be made available. The Company
is currently seeking alternative sources to fund its short-term capital needs,
but no assurances can be given that funding from these or any other sources will
be made available.
At current natural gas price levels and production volumes, it is unlikely that
the Company will be able to collectively fund drilling expenditures for its
already-reduced level of development operations, reduce the aging on its
accounts payable, commence amortization of the $23 million principal balance
outstanding on the Credit Facility as presently scheduled, and pay the October
1, 1999 interest payment on the Senior Notes. Accordingly, on June 29, 1999,
the Company met with representatives of holders representing more than one-half
of the outstanding Senior Notes regarding a proposal to exchange the Senior
Notes for Common Stock of the Company representing, after giving effect to the
exchange, approximately 93% of the outstanding Common Stock of the Company.
Under this proposal, existing stockholders of Michael Holdings, Inc., the
Company's parent corporation, and management of the Company, would own
approximately 7% of the outstanding Common Stock after giving effect to the
exchange, and would also be issued warrants to acquire up to approximately an
additional 20% of the Common
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Stock of the Company. A restructuring of the Company's Senior Note
indebtedness could be implemented outside of insolvency proceedings or in
connection with court-supervised bankruptcy proceedings, depending on the
degree of Noteholder support for the alternative chosen.
The proposal described above is preliminary in nature and no predictions can
be made by Company management as to the degree of success the Company may
achieve in its negotiations with Noteholders, whether a restructuring of its
Senior Note indebtedness will be accomplished on the terms described above,
whether such a restructuring can be effected outside of bankruptcy, if at
all, or if accomplished, whether the Company will be able to achieve its
business plan objectives following such a restructuring. Nothing contained
in this report shall constitute an offer to purchase, sell or exchange any
security.
This Current Report on Form 8-K contains certain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934. These
statements include whether additional sources of funds for operational and
capital expenditures will be available, the Company's ability to fund its
operational expenditures, the effects of any financial restructuring alternative
available, whether the Company can maintain and grow its production and reserve
base, and assuming a successful restructuring, whether the Company's business
plan can be accomplished. These statements reflect the Company's current views
with respect to future events and financial performance, and involve a number of
risks and uncertainties. Actual results could differ materially from those
projected in the forward-looking statements as a result of these risks and
uncertainties, including fluctuations in natural gas prices, risks associated
with oil and natural gas operations, the availability of sources of capital and
regulatory and environmental risks, adverse changes in the markets for the
Company's production, and risks that the Company may not be able to manage its
operations as anticipated by its business plan assuming a successful
restructuring. For a more detailed description of these and certain other risks
associated with the Company and its operations, see "Risk Factors" in the
Company's Form 10-K for its fiscal year ended December 31, 1998 and "Cautionary
Statement for Purposes of Forward Looking Statements" in the Company's Form 10-Q
for the three months ended March 31, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
MICHAEL PETROLEUM CORPORATION
By: /s/ ROBERT L. SWANSON
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Robert L. Swanson
Vice President -- Finance
Dated: June 29, 1999
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