As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/24/15  Halcon Resources Corp             8-K:1,3,8,9 4/21/15    3:545K                                   Merrill Corp-MD/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                      HTML     93K 
 2: EX-10.1     Material Contract                                   HTML    275K 
 3: EX-99.1     Miscellaneous Exhibit                               HTML      9K 

 

UNITED STATES

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): April 21, 2015

 

HALCÓN RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Registrant’s telephone number, including area code: (832) 538-0300

 

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):

 

o                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 1.01                             Entry into a Material Definitive Agreement.

 

Purchase Agreement

 

On April 21, 2015, Halcón Resources Corporation (the “Company”) and its wholly owned subsidiaries (the “Guarantors”) entered into a Purchase Agreement (the “Purchase Agreement”) with J.P. Morgan Securities LLC, as representative of the initial purchasers named therein (the “Initial Purchasers”), relating to the issuance and sale of $700,000,000 aggregate principal amount of the Company’s 8.625% senior secured second lien notes due 2020 (the “Notes”) at a purchase price of 100.0% of the principal amount of the Notes, in accordance with exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) afforded by Rule 144A and Regulation S under the Securities Act. The Company intends to use the net proceeds from the offering, which is expected to close on May 1, 2015, to repay the outstanding borrowings under its senior secured revolving credit facility and for general corporate purposes.

 

The Purchase Agreement contains customary representations and warranties of the parties, conditions to closing, and indemnification and contribution provisions under which the Company and the Guarantors, on one hand, and the Initial Purchasers, on the other, have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

 

The foregoing description of the Purchase Agreement is qualified by reference to the full text of the Purchase Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

 

Relationships

 

Certain of the Initial Purchasers and their respective affiliates have provided, and may in the future provide, other investment banking, commercial banking and financial advisory services to the Company and its affiliates in the ordinary course of business with the Company, for which they received or will receive customary fees and commissions. Affiliates of certain of the Initial Purchasers are lenders and/or agents under the Company’s senior secured revolving credit facility. Accordingly, they will also receive a portion of the net proceeds from the offering.

 

Item 3.02                             Unregistered Sales of Securities.

 

On April 24, 2015, the Company entered into an exchange agreement with several investment funds advised by Pioneer Investments, each of which is an existing holder (the “Holders”) of the Company’s 9.75% senior notes due 2020 (the “2020 Notes”), 8.875% senior notes due 2021 (the “2021 Notes”) and 9.25% senior notes due 2022 (the “2022 Notes” and together with the 2020 Notes or 2021 Notes, the “Senior Notes”), pursuant to which the Holders agreed to exchange an aggregate $25.0 million principal amount of the Senior Notes for approximately 14.8 million shares of the Company’s common stock, resulting in an effective exchange price of $1.69 per share.  Of the aggregate $25.0 million principal amount of Senior Notes to be exchanged by the Holders, approximately $2.8 million is principal amount of 2020 Notes, approximately $16.8 million is principal amount of 2021 Notes and approximately $5.4 million is principal amount of 2022 Notes.  The exchange offer is expected to close on or around April 30, 2015, at which time all interest that accrued since the relevant prior interest payment dates for each of the Notes will be paid to the Holders.

 

The exchange offer is being made in reliance on the exemption from registration provided by Section 3(a)(9) under the Securities Act of 1933, as amended.

 

Item 8.01                             Other Events.

 

Pricing Press Release

 

On April 21, 2015, the Company issued a press release announcing the pricing of the Notes. A copy of the Company’s press release is filed as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

 

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The press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which the offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state.

 

Supplement to Definitive Proxy Statement

 

The Company, the members of the Company’s board of directors and HALRES LLC (“HALRES”) have been named as defendants in three putative class action lawsuits brought in the Delaware Court of Chancery by shareholders of the Company challenging the approval of the issuance of additional shares of Halcón common stock to HALRES LLC upon conversion of our 8.0% senior convertible note and exercise of the warrants (the “Delaware Actions”). The complaints generally allege, among other things, that the members of the Company’s board of directors breached their fiduciary duties to shareholders of the Company by recommending the approval of the Amended Note and Amended Warrants.  The complaints also allege that HALRES aided and abetted the breaches of fiduciary duty allegedly committed by the members of the Company’s board of directors.  On April 7, 2015, the court granted a motion for consolidation of the lawsuits into a single action captioned In re Halcón Resources Corporation Stockholder Litigation, C.A. No. 10849-VCP and appointment of lead plaintiffs and lead counsel.  On March 27, 2015 plaintiffs filed a motion to expedite.  On April 14, 2015 plaintiffs filed a motion for a preliminary injunction seeking to enjoin the stockholder vote on Proposal 4 of the Company’s Definitive Proxy Statement on Schedule 14A filed on April 2, 2015.  On April 24, 2015 plaintiffs determined to withdraw that motion in view of the supplemental disclosures made herein.  The Company believes that the consolidated are without merit and intends to defend them vigorously.

 

1.                                      The Company’s Definitive Proxy Statement is hereby supplemented as follows:

 

A.  The second sentence in the first paragraph under Proposal 4 on page 69 of the Definitive Proxy Statement is hereby deleted and restated to read as follows:

 

“The members of our board of directors other than Mr. Godwin and Mr. Vlasic have a direct or indirect financial interest in HALRES or its stakeholders.”

 

B.  The following sentences are hereby added immediately after the end of the carry-over sentence on page 70 of the Definitive Proxy Statement:

 

“On January 29, 2015, the Special Committee originally was comprised of Mr. Godwin, Mr. Hunt and Mr. Vlasic.  On January 29, 2015, Mr. Hunt recused himself from the Special Committee, and thereafter the Special Committee was comprised of Mr. Godwin and Mr. Vlasic.  On January 30, 2015, Mr. Wilson recused himself from all negotiations with Halcón.”

 

C.  The following paragraphs are hereby added immediately after the first sentence in the first full paragraph on page 70 of the Definitive Proxy Statement:

 

“The Special Committee selected Evercore as its financial advisor in connection with the proposed transaction based on Evercore’s reputation and experience.  Evercore is a nationally recognized investment banking firm.  In connection with Evercore’s services as the financial advisor to the Special Committee, the Company has agreed to pay Evercore an aggregate fee of $750,000, $150,000 of which was payable upon signing the engagement letter and the remaining $600,000 of which was payable upon the delivery of an opinion to the Special Committee as to whether the Amended Note and Amended Warrants are on terms no less favorable to the Company than may reasonably be available to the Company from an unaffiliated third party.  Evercore was entitled to receive the $600,000 fee, regardless of the outcome of its opinion.  Evercore did not receive any compensation for its updated opinion dated March 12, 2015.  None of Evercore’s compensation is contingent on the approval of the Amended Note or Amended Warrants.  In addition, the Company has agreed to reimburse certain of Evercore’s expenses arising, and to indemnify Evercore against certain liabilities that may arise, out of Evercore’s engagement.  Evercore

 

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On March 9, 2015, after consulting with its legal and financial advisors, including consideration of the potential consequences of not extending the maturity of the 8.0% Convertible Note, the Special Committee concluded that it had all the necessary information to recommend to the Board that it approve a transaction that would (a) restructure the 8.0% Convertible Note such that (i) the maturity date would be extended from February 8, 2017 to February 8, 2020; (ii) the conversion price of $4.50 per share would be modified such that the 8.0% Convertible Note would be convertible into the Company’s common stock at a 30% premium above the volume weighted average price of the Company’s common stock on the New York Stock Exchange for the three trading days immediately preceding the acceptance of the proposal in writing by the Company, as defined by Bloomberg (the “Prior Reset Conversion Price”); (iii) the two year no call/no convert period, which term expired as of February 8, 2014, would recommence with such term expiring in 2017; and (iv) the existing warrants for the purchase of 36.7 million additional shares of the Company’s common stock at a price of $4.50 per share would be convertible at the Prior Reset Conversion Price, and (b) extend the registration rights for the common stock underlying the Amended Note and the Amended Warrant for three years to February 8, 2020 and restore the single demand registration right (out of three originally granted) previously exercised.”

 

D.  The following paragraphs are hereby added immediately before the penultimate sentence in the first full paragraph on page 70 of the Definitive Proxy Statement:

 

“In advising the Special Committee and arriving at its opinions dated March 9 and 12, 2015, Evercore had, among other things:

 

·                                          Reviewed certain publicly available business and financial information relating to the Company that Evercore deemed to be relevant, including the company’s periodic reports filed with the Securities and Exchange Commission since January 1, 2014 and publicly available research analysts’ estimates;

 

·                                          Reviewed and discussed with the Company’s management certain non-public projected financial and operating data relating to the Company prepared and furnished to Evercore by management of the Company (the “Management Projections”);

 

·                                          Discussed past and current operations, financial projections and current financial condition of the Company with management of the Company (including their views on the risks and uncertainties of achieving such projections);

 

·                                          Reviewed a report regarding the Company’s proved reserves prepared by Netherland, Sewell & Associates, Inc. dated December 31, 2014 with representatives of the Company;

 

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·                                          Reviewed a report regarding the Company’s proved, probable and possible reserves prepared by the Company dated as of October 31, 2014 with representatives of the Company;

 

·                                          Reviewed the reported prices and historical trading activity of the Company’s common stock and the Company’s senior notes;

 

·                                          Compared the financial performance of the Company and its stock market trading multiples with those of certain other publicly-traded companies that Evercore deemed relevant;

 

·                                          Compared the financial performance of the Company and its stock market trading multiples with those implied by certain other transactions that Evercore deemed relevant;

 

·                                          Reviewed recent relevant debt refinancing transactions in the oil and gas industry;

 

·                                          Calculated the estimated value of the 8.0% Convertible Note and the Warrant in the Transaction using the Black-Scholes model;

 

·                                          Reviewed the Amendment Documents dated March 9, 2015; and

 

·                                          Performed such other analyses and examinations and considered such other factors that Evercore deemed appropriate.

 

In calculating the estimated value of the 8.0% Convertible Note and the Warrant in the Transaction using the Black-Scholes model, Evercore performed the analysis using a stock volatility of both 45% and 85%.  Evercore also performed this analysis using a price for the Company’s common stock of both $1.69 per share (the closing price on February 27, 2015) and $0.01 per share (a price consistent with the net asset value and peer group trading analyses of the Company’s common stock conducted by Evercore, based on the assumptions used by Evercore).  The 8.0% and Convertible Note analyses are summarized below and should be read in conjunction with the qualifications described below the table:

 

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reflecting the best currently available estimates and good faith judgments of management of the Company as to the future financial performance of the Company under the assumptions reflected therein.  Evercore expressed no view as to any projected financial data relating to the Company or the assumptions on which they are based.  Evercore expressed no view as to any reserve or resource data relating to the Company or the assumptions on which they are based.”

 

E.                                     The first sentence in the first full paragraph of the “Voting Agreements” section on page 71 of the Definitive Proxy Statement is hereby deleted and restated to read as follows:

 

“In connection with the approval of the Amended Note and Amended Warrants by our board of directors, we entered into separate Voting Agreements with certain holders of our common stock, including certain of our officers and the following members of our board of directors: Floyd C. Wilson, Tucker S. Bridwell, James W. Christmas, Thomas R. Fuller, David S. Hunt, David B. Miller, Michael A. Vlasic and Mark A. Welsh IV (“Support Parties”).”

 

The foregoing supplemental information should be read in conjunction with the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 2, 2015, which should be read in its entirety.  Defined terms used in the foregoing supplemental information but not defined therein have the meanings set forth in the Definitive Proxy Statement.

 

Item 9.01                             Financial Statements and Exhibits.

 

(d)   Exhibits. The following exhibit is included as part of this Current Report on Form 8-K:

 

Exhibit No.		Description
10.1		Purchase Agreement dated April 21, 2015 by and between the Company, the Guarantors and J.P. Morgan Securities LLC, as representatives of the Initial Purchasers named therein.
99.1		Press release issued by the Company on April 21, 2015.

 

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