Rex Energy Deal Converts $43.5M of Debt into Stock Ownership

Rex EnergyToday’s lead story on MDN is about Atlas Resource Partners’ plan to file a pre-packaged bankruptcy turning some $900 million of debt into ownership equity (see Atlas Resource Partners Filing for Bankruptcy Tomorrow). Another Marcellus/Utica company is doing something similar, but without filing for bankruptcy. In April MDN told you about Rex Energy’s plan to convert some outstanding debt into shares of stock (see Rex Energy Converts IOUs into Common Stock, Avoids Bankruptcy?). Rex is doing it again. Yesterday Rex announced they’ve cut an agreement with an unnamed investor to convert $43.5 million owed to that investor into shares of stock. By doing so, Rex not only saves paying back the $43.5 million, they’ll also save paying out an additional $11.1 million in interest payments that would have been due over the life of the loan. However, our understanding is that converting debt into equity (shares of stock) dilutes the ownership interest of all current stockholders. The only difference we can see between what Atlas is doing and what Rex is doing is that (so far) Rex has stayed out of bankruptcy court…

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