TABLE OF CONTENTS
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Item 1.01 |
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Entry into a Material Definitive Agreement. |
Underwriting
Agreement
On December 9, 2010, Concho Resources Inc. (the Company) and certain of its subsidiaries
entered into an underwriting agreement (the Underwriting Agreement) with J.P. Morgan Securities
LLC, as representative of the underwriters named in Schedule 1 thereto (collectively, the
Underwriters), in connection with an underwritten public offering of $600 million aggregate
principal amount of the Companys 7.0% Senior Notes due 2021 (the Notes). The issuance and sale
of the Notes has been registered under the Securities Act of 1933 (the Securities Act) pursuant
to an automatic shelf Registration Statement on Form S-3 (Registration No. 333-161809), as amended,
of the Company, filed with the Securities and Exchange Commission
(the Commission) on September 9,
2009 (the Registration Statement). Closing
of the issuance and sale of the Notes occurred on
December 14, 2010. A legal opinion related to the Notes is filed herewith as Exhibit 5.1.
The Underwriting Agreement contains customary representations, warranties and agreements by
the Company and customary conditions to closing, obligations of the parties and termination
provisions. Additionally, the Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make because of any of those liabilities. Furthermore, the Company
has agreed with the Underwriters not to offer or sell any debt securities issued or guaranteed by
the Company having a term of more than one year (other than the Notes) for a period of 45 days
after the date of the Underwriting Agreement without the prior written consent of J.P. Morgan
Securities LLC.
The Underwriters or their affiliates have from time to time provided investment banking,
commercial banking and financial advisory services to the Company, for which they have received
customary compensation. The Underwriters and their affiliates may provide similar services in the
future. In particular, certain of the underwriters or their affiliates are lenders under the
Companys credit facility and will receive a portion of the net proceeds from this offering. In
addition, from time to time, certain of the Underwriters and their affiliates may effect
transactions for their own account or the account of customers, and hold on behalf of themselves or
their customers, long or short positions in the Companys debt or equity securities or loans, and
may do so in the future.
The foregoing description of the Underwriting Agreement is qualified in its entirety by
reference to such Underwriting Agreement, a copy of which is filed herewith as Exhibit 1.1 and is
incorporated herein by reference.
Supplemental Indenture for 7.0% Senior Notes due 2021
On December 14, 2010, the Company completed the public offering of the Notes. The Notes
are fully and unconditionally guaranteed on a senior unsecured basis by certain of the
Companys subsidiaries (collectively, the Subsidiary Guarantors): COG Holdings LLC, COG
Operating LLC, COG Realty LLC, Concho Energy Services LLC, Concho Oil & Gas LLC and Quail
Ranch LLC.
The terms of the Notes are governed by the indenture dated as of September 18, 2009 (the
Base Indenture), among the Company, certain of the Subsidiary Guarantors, and Wells Fargo
Bank, National Association, as trustee (the Trustee), as amended and supplemented by the
third supplemental indenture, dated as of December 14, 2010 (the Supplemental Indenture; the
Base Indenture, as amended and supplemented by the Supplemental Indenture, the Indenture).
The Notes will mature on January 15, 2021, and interest is payable on the Notes on each
January 15 and July 15, commencing on July 15, 2011. The Company may redeem some or all of the
Notes at any time on or after January 15, 2016 at the redemption prices specified in the
Indenture. The Company may also redeem up to 35% of the Notes using all or a portion of the
net proceeds of certain public sales of equity interests completed before January 15, 2014 at
a redemption price as specified in the Indenture. If the Company sells certain assets or
experiences specific kinds of change of control, each as described in the Indenture, each
holder of the Notes will have the right to require the Company to repurchase the Notes at a
purchase price described in the Indenture plus accrued and unpaid interest, if any, to the
date of repurchase.
The Notes are the Companys senior unsecured obligations, and will rank equally in right
of payment with all of the Companys existing and future senior debt, and will rank senior in
right of payment to all of the Companys future subordinated debt. The Notes will be
effectively subordinated to all of the Companys existing and future secured debt to the extent
of the value of the collateral securing such indebtedness.
The Indenture restricts the Companys ability and the ability of certain of its
subsidiaries to, among other things: (i) incur additional indebtedness; (ii) pay distributions
or dividends on equity or purchase, redeem or otherwise acquire equity; (iii) make certain
investments; (iv) use assets as collateral in other transactions; (v) sell certain assets or
merge with or into other companies; and (vi) enter into transactions with affiliates. These
covenants are subject to a number of important exceptions and qualifications.
The Indenture contains customary events of default, including:
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default in any payment of interest on any Note when due, continued for 30 days; |
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default in the payment of principal of or premium, if any, on any Note when due; |
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failure by the Company to comply with its obligations under the Indenture, in certain cases
subject to notice and grace periods; |
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payment defaults and accelerations with respect to other indebtedness of the Company and its
Restricted Subsidiaries (as defined in the Indenture) in the aggregate principal amount of $30.0
million or more; |
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certain events of bankruptcy, insolvency or reorganization of the Company or a Significant
Subsidiary (as defined in the Indenture) or group of Restricted Subsidiaries that, taken together,
would constitute a Significant Subsidiary; |
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failure by the Company or any Significant Subsidiary or group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary to pay certain final judgments
aggregating in excess of $30.0 million within 60 days; and |
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any Subsidiary Guarantee of a Significant Subsidiary or group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, ceases to be in full force and effect,
is declared null and void in a judicial proceeding or is denied or disaffirmed by its maker. |
If an event of default under the Indenture occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the outstanding Notes may declare the principal
of, premium, if any, and accrued and unpaid interest, if any, on the Notes to be due and
payable, or, in the case of certain events of default relating to bankruptcy, insolvency or
reorganization, those amounts will automatically become immediately due and payable.
Other material terms of the Notes, the Base Indenture and the Supplemental Indenture
are described in the prospectus supplement, dated December 9, 2010, as filed by the Company
and the Subsidiary Guarantors with the Commission on December 10, 2010. The foregoing
descriptions of the Indenture and the Notes are qualified in their entirety by reference to
such Indenture (including the form of Notes attached thereto), a copy of which is filed
herewith as Exhibit 4.1 and is incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
The description contained under Item 1.01 above is incorporated by reference in its
entirety into this Item 2.03.
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Item 9.01 |
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Financial Statements and Exhibits. |
(d) Exhibits.
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Exhibit Number |
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Description |
1.1 |
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Underwriting Agreement dated December 9, 2010, by and among
Concho Resources Inc., the subsidiary guarantors named
therein and J.P. Morgan Securities LLC, as representative
of the underwriters named therein. |
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4.1 |
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Third Supplemental Indenture, dated December 14, 2010, between Concho Resources Inc., the subsidiary guarantors named therein, and Wells Fargo Bank, National Association, as trustee.
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4.2 |
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Form of 7.0% Senior Notes due 2021 (included in Exhibit 4.1).
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5.1 |
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Opinion of Vinson & Elkins L.L.P. |
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23.1 |
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Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1). |