BKV Corp., a Denver-based energy company focused on natural gas production in the Barnett Shale region, plans to sell $400 million in convertible senior notes due 2031 in a private placement to qualified institutional buyers under Rule 144A, the company said.
BKV has granted the initial purchasers an option to buy up to an additional $60 million in notes within 13 days of issuance.
The notes will mature on October 15, 2031, and rank as senior, unsecured obligations carrying interest payable semi-annually. The company may redeem the notes for cash beginning October 15, 2029, subject to conditions including whether the last reported sale price of its common stock exceeds 130% of the conversion price over a specified period.
Holders of the notes may convert them under certain circumstances, with BKV retaining discretion to settle conversions through cash, common stock, or a combination of both.
The company intends to use proceeds from the offering primarily to fund capped call transactions designed to reduce potential dilution to common shareholders upon conversion and offset potential cash payments that could exceed the principal amount of converted notes. Up to approximately $35 million in proceeds will be used to repurchase common stock at the offering price date, with remaining funds directed toward general corporate purposes, including debt repayment and capital expenditures.
BKV expects to enter into the capped call transactions with the initial purchasers or their affiliates and other financial institutions. The option counterparties to those transactions may purchase common stock or enter into derivative transactions to establish hedges, which could affect the stock price.
