Rex Energy Converts IOUs into Common Stock, Avoids Bankruptcy?

Rex EnergyIn what appears to be an ongoing strategy/trend among exploration and production companies (i.e. drillers), Rex Energy is the latest driller to convert outstanding debt in the form of notes (IOUs) into equity, or stock ownership. Earlier this year Rex, a small Marcellus/Utica driller headquartered in State College, PA, offered to refinance its IOUs so the notes expire later, meaning Rex wouldn’t have to cough up cash sooner to pay off the debt (see Rex Energy Offers to Refinance Outstanding IOUs). With few takers for a second lien, Rex then offered to sweeten the deal (see Rex Energy Extends & Sweetens Offer to Refi Outstanding IOUs). Rex finally closed out the offer at the end of March (see Sigh of Relief for Rex Energy: Noteholders Agree to 2nd Lien Deal). But what’s this? Rex announced yesterday they have exchanged a bunch of the notes, along with some preferred stock and second liens, for common stock. We’ve seen this before with companies either heading for or in bankruptcy–they exchange debt for equity. The strategy turns outstanding debt into ownership in the company, which tends to devalue the stock held by existing investors. Here’s the Rex announcement…

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