Linn Energy LLC (NASDAQ:LINE) and LinnCo, LLC (NASDAQ:LNCO) announced that LINN has entered into a series of privately negotiated transactions to exchange an aggregate principal amount of $2 billion of the Company’s senior unsecured notes (the “Unsecured Notes”) for an aggregate principal amount of $1 billion of newly issued senior secured second lien notes (the “Second Lien Notes”). These exchanges are expected to improve LINN’s balance sheet and reduce interest expense.
The Company has entered into exchange agreements with certain unsecured noteholders pursuant to which the noteholders have agreed to exchange certain of their existing Unsecured Notes for newly issued Second Lien Notes at a price of 50 percent of the principal amount of the Unsecured Notes set forth in the table below. The Second Lien Notes will be issued pursuant to the terms and conditions of an Indenture to be entered into between the Company and U.S. Bank, National Association, as trustee (the “Indenture”), will bear interest at a rate of 12.0 percent per annum and have a scheduled maturity date of December 2020, subject to potential earlier maturity under the conditions to be outlined in the Indenture (“Springing Maturity”).
|Unsecured Notes Exchanged ($ in millions)||Par Value of|
of Second Lien
|6.50% senior notes due May 2019||$||584||$||292|
|6.25% senior notes due November 2019||824||412|
|8.625% senior notes due April 2020||286||143|
|7.75% senior notes due February 2021||184||92|
|6.50% senior notes due September 2021||121||61|
|(1) Does not sum due to rounding.|
These exchanges are expected to close November 20, 2015, subject to closing conditions.
Strategic advantages of these exchanges:
- Reduce total debt by $1 billion,
- Decrease annualized interest expense by approximately $16 million;
- Reduce the nearest senior unsecured debt maturities (due in 2019) by approximately $1.4 billion, or 53 percent, subject to the potential Springing Maturity of the Second Lien Notes; and
- Preserve $500 million of second lien capacity for potential future issuance of new secured debt.
“This transaction and its positive effects on the Company’s financial position represent another meaningful step forward in improving our balance sheet,” said Mark E. Ellis, Chairman, President and Chief Executive Officer. “These exchanges result in a material debt reduction and also improve our cash interest expense by approximately $16 million per year.” (Original Source)
Shares of Linn Energy are up 1.02% to $2.29 in after-hours trading. LINE has a 1-year high of $24.23 and a 1-year low of $2.01. The stock’s 50-day moving average is $2.78 and its 200-day moving average is $5.98.
On the ratings front, Linn Energy has been the subject of a number of recent research reports. In a report issued on October 12, FBR analyst Chad Mabry downgraded LINE to Sell, with a price target of $2, which implies a downside of 11.9% from current levels. Separately, on October 6, Stifel Nicolaus’ Brian Brungardt downgraded the stock to Hold .
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Chad Mabry and Brian Brungardt have a total average return of -39.5% and -62.0% respectively. Mabry has a success rate of 18.8% and is ranked #3838 out of 3842 analysts, while Brungardt has a success rate of 0.0% and is ranked #3827.
The street is mostly Neutral on LINE stock. Out of 5 analysts who cover the stock, 4 suggest a Hold rating and one recommends to Sell the stock. The 12-month average price target assigned to the stock is $2.75, which implies an upside of 21.1% from current levels.
Linn Energy LLC is an independent oil and natural gas company. The Company’s properties are located in United States in Rockies, Hugoton Basin, California, East Texas and north Louisiana, Mid-Continent, Permian Basin, Michigan/Illinois and South Texas.