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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): November 12, 1998
FORCENERGY INC
(Exact name of registrant as specified in its charter)
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<S> <C> <C> <C>
Delaware 0-26444 65-0429338
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation or organization)
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2730 S.W. 3rd Avenue, Suite 800
Miami, Florida 33129-2356
(Address of principal
executive offices
and zip code)
(305) 853-8500
(Registrant's telephone number,
including area code)
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ITEM 5. OTHER EVENTS.
On November 12, 1998, Forcenergy Inc (the "Company") entered into a
Stock Purchase Agreement (the "Purchase Agreement") with certain affiliates of
Madison Dearborn Partners, Inc. and Oaktree Capital Management, LLC
(collectively, the "Purchasers"). The Purchase Agreement provides that, subject
to certain conditions, the Company will initially issue (the "Initial Issuance")
to the Purchasers 840,000 shares of 8% Cumulative Convertible Preferred Stock
with a liquidation value of $50.00 per share (the "Preferred Stock").
Each share of Preferred Stock will be convertible at any time at the
option of the holder into 5.68182 shares of the Company's common stock (the
"Common Stock") (a conversion price of $8.80 per share of Common Stock), subject
to customary antidilution protections. Dividends accruing on the Preferred Stock
will be paid in shares of Common Stock on or prior to December 31, 2001, and
thereafter will be payable in Common Stock, cash or a combination thereof.
Subject to the satisfaction of certain conditions, the Preferred Stock will be
redeemable at the option of the Company at any time after three years from the
date of the Initial Issuance by the issuance of Common Stock, cash or a
combination thereof. Holders of Preferred Stock will be entitled to require the
Company to convert shares of Preferred Stock into shares of Common Stock equal
to the liquidation value, plus the applicable redemption premium upon certain
changes of control or insolvency events; provided, the Company, at its option,
may redeem such shares in cash in lieu of the issuance of Common Stock.
Promptly following the Initial Issuance, the Company is required by the
Purchase Agreement to conduct a rights offering (the "Rights Offering") in which
the Company will distribute to each holder of record of the Company's Common
Stock and Preferred Stock (including the Purchasers), as of a date to be
specified by the Board of Directors, transferable rights (the "Rights") to
purchase at a price of $50.00 per share, a pro rata portion (proportional to
each such holder's ownership of Common Stock on an "as if converted" basis) of
approximately 2,160,000 shares of Preferred Stock to be offered in the Rights
Offering. Pursuant to the Purchase Agreement, each Right is expected to carry
the right to subscribe at the $50.00 subscription price for additional shares of
Preferred Stock for which the other holders of Rights did not subscribe through
the exercise of their subscription privilege. The Purchasers have agreed,
subject to certain conditions, (i) to exercise their subscription privilege in
full in the Rights Offering, (ii) not to exercise any oversubscription
privileges in the Rights Offering and (iii) to acquire upon consummation of the
Rights Offering all of the shares of Preferred Stock not subscribed for by other
holders pursuant to either their subscription or oversubscription privileges,
provided that they will not be required to purchase an amount of Preferred Stock
that would trigger a "change of control" under the terms of any of the Company's
outstanding indebtedness.
The shares of Preferred Stock to be issued to the Purchasers in the
Initial Issuance will be convertible into an aggregate of approximately 4.8
million shares of Common Stock, representing approximately 16.2% of the
Company's pro forma shares of Common Stock outstanding. Assuming consummation of
both the Initial Issuance and the Rights Offering and the sale of all of the
shares of Preferred Stock offered therein, the Preferred Stock issued will be
convertible into an aggregate of 17.0 million shares of Common Stock,
representing approximately 40.8% of the Company's pro forma shares of Common
Stock outstanding.
Pursuant to the Purchase Agreement, the Company and the Purchasers have
agreed to enter into an agreement (the "Shareholders Agreement") at the time of
the Initial Issuance pursuant to which, among other things, (i) the Company will
grant to the Purchasers and their designated transferees certain registration
rights with respect to the shares of Preferred Stock and Common Stock held by
them, (ii) the size of the Company's Board of Directors will be set at eight and
the Company will grant to the Purchasers, but not their transferees, the right
to designate three directors (subject to reduction in the event the Purchasers'
holdings of Preferred Stock and shares of Common Stock fall below certain
thresholds to be set forth in the Shareholders Agreement) and (iii) the Company
will grant to the Purchasers, but not their transferees, for so long as the
Purchasers continue to own at least 25% of their original investment (including
any shares acquired in the Rights Offering) and at least 10% of the Company's
shares of issued and outstanding Common Stock, the right to approve, among other
things, (a) the consummation of certain material transactions, (b) the
incurrence of certain indebtedness, (c) the payment in certain circumstances of
dividends on, or redemptions of, securities ranking junior to the Preferred
Stock, (d) the adoption of the Company's annual capital budget and (e) the
appointment of any successor to the Company's chief executive officer.
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In order that the Company will have a sufficient number of shares of
Common Stock authorized to consummate the Rights Offering, the Company has
called a Special Meeting of Stockholders of the Company to be held January 5,
1999 to approve and adopt an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of the
Company's Common Stock from 50 million to 100 million and to increase the number
of authorized shares of the Company's Preferred Stock from five million to ten
million.
This report is neither an offer to sell nor a solicitation of an offer
to purchase any Rights, shares of Common Stock or shares of Preferred Stock, and
any offering of securities of the Company described herein will be made only by
means of a prospectus.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description
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99.1 Press Release, dated November 12, 1998, of
Forcenergy Inc announcing execution of Stock
Purchase Agreement and prospective sale of
8% Cumulative Convertible Preferred Stock
contemplated thereby.
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SIGNATURES
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.
FORCENERGY INC
Date: November 16, 1998
By: /s/ E. Joseph Grady
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E. Joseph Grady
Vice President, Treasurer
and Chief Financial Officer
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Exhibit 99.1
FORCENERGY ANNOUNCES $150 MILLION EQUITY INVESTMENT LED BY MADISON
DEARBORN PARTNERS AND OAKTREE CAPITAL MANAGEMENT
Preferred Stock Convertible at $8.80 Per Share
MIAMI----November 12, 1998--Forcenergy Inc (NYSE:FEN - news) announced
today that it has signed a definitive agreement under which Madison Dearborn
Partners, Inc. and Oaktree Capital Management, LLC will lead an equity
investment in Forcenergy in an amount up to $150 million.
Under the terms of the agreement, funds and accounts managed by Madison
Dearborn and Oaktree Capital will initially invest $42 million to acquire
convertible preferred shares representing approximately 16.2% of Forcenergy's
pro forma common shares outstanding. The initial investment is expected to close
within two weeks. Following this initial investment, Forcenergy intends to issue
rights to its shareholders to purchase approximately $108 million in additional
convertible preferred shares representing approximately 29.4% of Forcenergy's
pro forma common shares outstanding. As a part of the agreement, certain funds
and accounts managed by Madison Dearborn and Oaktree Capital have agreed to
participate in the rights offering and to purchase all unsubscribed shares of
the rights offering, subject to certain limitations to avoid triggering a
potential change of control under Forcenergy's indentures (defined as 50%). Upon
completion of the rights offering, the total convertible preferred shares will
represent approximately 40.8% of Forcenergy's pro forma common shares
outstanding. The preferred shares will be convertible into Forcenergy's common
shares at $8.80 per share (representing a 28% premium over Forcenergy's closing
price on November 10, 1998). The preferred shares will have an 8% dividend
payable quarterly in Forcenergy common stock for a period of three years and in
Forcenergy common stock or cash, at Forcenergy's discretion, thereafter.
The combined proceeds of the initial investment and subsequent rights
offering will be used to reduce outstanding debt under Forcenergy's existing
senior credit facility and for general corporate purposes. The initial
investment and rights offering are subject to customary closing conditions.
In connection with the initial investment, Forcenergy's Board of
Directors will increase in size from five members to eight. Madison Dearborn and
Oaktree Capital will nominate three new Board members to be appointed to the
Forcenergy Board of Directors.
Stig Wennerstrom, Forcenergy's Chairman and CEO, stated, "This equity
infusion is important in that it assures our shareholders that Forcenergy will
have the ability to carry through our ongoing projects like the development of
the Redoubt Shoal field in Cook Inlet and the evaluation of our potential
world-class coalbed methane project in New South Wales, Australia. We will also
continue the exploitation of lower-risk projects in the Gulf of Mexico. Through
this equity infusion, Forcenergy will re-establish the financial strength and
flexibility needed to fully develop
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our existing asset base and to assure that short-term market conditions do not
derail our long-term goals designed to maximize shareholder value. By
structuring the majority of the equity infusion as a rights offering, we are
pleased to give our existing shareholders the opportunity to participate in the
preferred stock offering and thus minimize dilution through their
participation."
Forcenergy is an independent oil and gas company engaged in the
exploration, acquisition, development, exploitation and production of oil and
natural gas.
Certain statements in this news release regarding future expectations
and plans for future activities may be regarded as "forward looking statements"
within the meaning of the Securities Litigation Reform Act. They are subject to
various risks, such as financial market conditions, operating hazards, drilling
risks, and the inherent uncertainties in interpreting engineering data relating
to underground accumulation of oil and natural gas, as well as other risks
discussed in detail in the Company's SEC filings, including the Annual Report
and Form 10-K for the year ended December 31, 1997. Actual results may vary
materially.
Contact:
Forcenergy Inc, Miami
J. Russell Porter
E. Joseph Grady
(305) 856-8500
