On Monday, Chevron Corp. (NYSE:CVX) announced its decision to cancel the debt exchange offer with PDC Energy Inc.’s bondholders due to a lack of participation. The oil giant had recently proposed an exchange offer, suggesting the substitution of PDC’s 5.75% notes maturing in 2026 with new notes having identical terms. Bondholders who committed to the initiative before the early deadline of August 16 were entitled to receive $1,001 worth of new Chevron notes for every $1,000 of PDC debt surrendered.
However, sources report that the compensation package for the exchange fell short of expectations, leading to significant resistance from noteholders. A considerable majority of PDC’s bondholders expressed their reluctance to tender their bonds in response to Chevron’s acquisition of the company. The prevailing sentiment was that the compensation offered in the swap was inadequate.
PDC Energy Inc. has now made plans to redeem the notes alternatively on or after May 15, 2024, according to a regulatory filing made on Monday. The compensation offered in the exchange proposal did not meet the commonly expected threshold of 101 cents on the dollar as stipulated in bond documentation for instances of a “change of control,” such as an acquisition. Notably, the terms of PDC’s bonds meant that Chevron’s acquisition did not trigger the change of control provision, as the debt did not experience a downgrade. The Credit Roundtable, a bondholder advisory group, provided this insight.
Chevron’s acquisition of PDC was agreed upon in May and carried a total value of $6.3 billion, payable entirely in stock. The transaction, which was completed earlier this month, forms a strategic part of Chevron’s expansion plans within Colorado’s Denver-Julesburg basin, focused on bolstering drilling activities.
Featured Image: Unsplash
