Lone Pine Resources Inc. (OTC: LPRIQ) has reached agreement with holders of 75% of the outstanding 10.375% senior notes due 2017 issued by Lone Pine Resources Canada Ltd. on a restructuring plan.

If successfully implemented, the plan will significantly reduce the company's debt obligations and materially improve the company's overall capitalization and liquidity. The company has commenced proceedings in the Court of Queen's Bench of Alberta under the companies' Creditors Arrangement Act (CCAA), and ancillary proceedings under Chapter 15 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware, to implement the restructuring. Lone Pine, LPR Canada and all other subsidiaries of the company are parties to the CCAA and Chapter 15 proceedings.

"The proposed restructuring transaction is the result of a lengthy evaluation and deliberation by Lone Pine's management and board of directors, together with its financial and legal advisors, on a range of alternatives available to the company," Tim Granger, president and CEO, said in the release. "The proposed restructuring is designed to significantly reduce the company's long-term debt and improve its liquidity, which will allow Lone Pine to resume investment in its attractive asset base, while at the same time allowing the company to retain its relationships with its current employees, industry partners and suppliers."

The restructuring provides for the cancellation of all outstanding shares of Lone Pine common stock, the conversion of all senior notes into new common equity, and a new equity investment of US $100 million by holders of the senior notes through a private offering to eligible noteholders of convertible preferred shares. The proposed restructuring is the result of agreements reached with supporting noteholders representing a significant majority of the outstanding senior notes, and consideration by the board of directors of Lone Pine, with advice from its financial and legal advisors, of all available alternatives. Based on such consideration and advice, the board of directors of Lone Pine has determined that the proposed restructuring is in the best interests of the company.

The restructuring contemplates that the share offering will be made available to all eligible noteholders on a pro rata basis pursuant to available exemptions from the prospectus requirements of Canadian securities legislation and the registration requirements of the U.S. Securities Act, as amended. Certain of the supporting noteholders have provided a backstop commitment to subscribe for any portion of the proposed share offering that is not taken up by other noteholders. The preferred shares to be issued under the share offering will be convertible, in aggregate, into such number of common shares as is equal to the 75% of the common shares outstanding on an "as converted" basis on completion of the restructuring. The preferred shares will carry preferential dividend and liquidation rights, and certain corporate transactions and other matters will, following completion of the restructuring, be subject to preferred shareholder approval in certain circumstances. Details concerning the timing and mechanics of participating in the share offering, including as an additional backstop party, will be made available as part of the meeting materials to be sent to all noteholders.

It is a condition to the restructuring that Lone Pine obtain a new secured credit facility, and the company is engaged in active lender discussions for this purpose. Proceeds from the share offering and borrowings under the new credit facility will be used, in part, to repay all indebtedness under the company's existing secured credit facility, which, as of Sept. 24, was C $180 million.

The company has agreed, pursuant to the terms of a support agreement entered into with each of the supporting noteholders, to pursue the restructuring through a plan of compromise and arrangement under the CCAA, which will be subject to creditor and court approval, and ancillary proceedings under Chapter 15 of the U.S. Bankruptcy Code for recognition of the CCAA proceedings. The supporting noteholders, who collectively hold more than 75% of the outstanding senior notes, have agreed under the support agreements to support the restructuring plan and vote their claims under the senior notes in favor of its approval at any meeting of creditors to be held for that purpose. The definitive terms of the restructuring will be set forth in the CCAA plan of compromise and arrangement. The foregoing summary descriptions of the support agreements and the backstop agreements are not complete descriptions of the parties' rights and obligations under such agreements, and interested parties are encouraged to review the forms of support agreement and the backstop agreement which have been filed by the company on EDGAR and SEDAR.

During the CCAA proceedings Lone Pine expects to continue with its day-to-day operations, and employee obligations and any trade payables incurred after today are expected to be paid or satisfied in the ordinary course. The company has agreed to the principal terms of a new C $10 million debtor-in-possession credit facility with certain of its existing secured lenders, subject to the negotiation and execution of definitive documentation. The debtor-in-possession credit facility, together with current cash balances of C $4 million and anticipated cash flow from operations, are expected to provide sufficient liquidity to the company through the restructuring period.

Trading of Lone Pine's common stock on the Toronto Stock Exchange has been halted, and the company anticipates that the trading halt will remain in effect pending delisting of the common stock. The company expects to complete the restructuring before Dec.31.

RBC Capital Markets, Bennett Jones LLP, Vinson & Elkins LLP and Richards Layton & Finger P.A. are advising the company. Wachtell, Lipton, Rosen & Katz LLP is providing independent advice to the board of directors. Goodmans LLP and Stroock & Stroock & Lavan LLP are advising the supporting noteholders.

The securities to be offered in connection with the restructuring have not been registered under the Securities Act or any state securities laws.

Lone Pine Resources Inc. is an independent energy company engaged in the exploration and development of natural gas and light oil in Canada. The company is based in Calgary.