OREANDA-NEWS. OGX, the Brazilian oil exploration and production company, announces that it has reached agreement with a majority of its bondholders on the terms of a financial restructuring that provides a path for the Company to continue its operations and build for the future.

Under the terms of the agreement, if the supported Reorganization Plan is approved, creditors will convert approximately USD 5,8 billion in pre-petition debt into equity in the company. Additionally, as part of the restructuring, OGX may obtain a commitment for USD 200 million to USD 215 million in Debtor-in-Possession (DIP) financing, which will allow the company to meet its ongoing commitments and continue its activities. These funds would come through a debenture to be issued on January 2014, convertible into equity, subject to certain conditions. OGX will continue being a listed company after approval of the agreement.

Paulo Narcelio Simoes Amaral, Chief Executive Officer of OGX, declared: “We are pleased that we have successfully agreed on a restructuring framework with our creditors and have opened the opportunity to raise new financing to continue developing OGX. This agreement with the majority of bondholders is a result of extensive arm's length and good faith discussions that will facilitate a speedy resolution of OGX's financial situation and offer the company a new start. It is a major vote of confidence in OGX's future, leaving the company on sound footing to take advantage of the immense potential of Brazil's oil industry.”

The Ad Hoc group of bondholders said: “We are pleased that this important milestone has been reached. We look forward to working with the Company and all other stakeholders to try to complete the reorganization of the company as expeditiously as possible.”

The USD 5,8 billion in debt that is being restructured breaks down as follows:

USD 3,8 billion held by bondholders

USD 1,5 billion representing claims for termination fees from OSX

?USD 500 million from other suppliers

As part of this restructuring, OGX's current shareholders will hold a combined stake of 10% on a fully diluted basis, and will receive 5-year warrants for 15% of fully diluted restructured OGX, at a strike price based on a USD 1.5 billion enterprise value.

As a result of this restructuring plan, OGX's debt will be extinguished and the company will be able to focus on continuing its exploration and production activities. OGX has a diversified portfolio comprised of exploratory blocks in the Campos, Santos, Espirito Santo, Para-Maranhao and Parnaiba basins in Brazil and exploratory blocks in Colombia. OGX announced last month that it has started production at the Tubarao Martelo field in Campos Basin.

The restructuring proposal requires approval from the majority of creditors, and from the judge who is in charge of OGX's judicial recovery process. The company filed for judicial recovery on October 30, 2013.

The transaction is subject to certain conditions precedent, including the execution of the DIP Financing documents by January 24, 2014 and the filling of the Judicial Reorganization Plan, which will contain detailed terms and conditions of the transaction.