Exhibit 1
FOR IMMEDIATE RELEASE CONTACT: JAY ROSSER
FEBRUARY 29, 1996 (214) 402-7019
MESA AND RICHARD RAINWATER ANNOUNCE PRELIMINARY
AGREEMENT FOR MAJOR EQUITY INVESTMENT
$1.2 Billion Recapitalization Designed to Place MESA on Firm Financial
Footing
MESA Inc. and Rainwater, Inc., a company owned by Fort Worth, Texas
investor Richard Rainwater and managed by Darla D. Moore and Kenneth A.
Hersh, announced today they have signed a letter of intent to raise $265
million of equity in connection with a refinancing of MESA's debt.
The letter of intent calls for a recapitalization of MESA in which
Rainwater and affiliates will purchase $133 million of convertible preferred
stock, provide a standby commitment for a $132 million rights offering of
convertible preferred stock and assist in the refinancing of all of MESA's
debt not repaid with proceeds from the stock issuance.
The MESA/Rainwater transaction caps a 13-month long effort by the
company to strengthen its financial position. The effort included a
comprehensive review and solicitation of strategic alternatives by Lehman
Brothers, the company's independent financial adviser.
"We've spent a lot of time working on our debt. This transaction will
get us back to doing what we do best: finding gas and oil and making
deals," said Boone Pickens, MESA's chairman and CEO.
"MESA has perhaps the highest quality reserve base in North America and
has a long and proud history as an efficient operator," said Rainwater. "I
believe the recapitalization of the company will enable MESA to build value
for shareholders through the exploration, development and production
business where it has historically excelled and to continue to benefit from
the increases in commodity prices. In addition, the recapitalization will
afford the company the financial flexibility to pursue value-added
transactions in the future."
Rainwater is a private investor with an enviable track record of
investing in companies which grow to become industry leaders. In the oil
service industry, Rainwater founded Energy Services Company in 1986. That
company has grown into ENSCO International, the largest offshore drilling
rig operator in the world. He co-founded Columbia Hospital Corp. in 1987,
which has grown into Columbia/HCA Healthcare Corp., the nation's largest
publicly traded hospital chain. In 1992 he co-founded Mid Ocean Limited,
one of the premiere catastrophic reinsurance companies. Since early 1994,
Rainwater has been spending a significant portion of his time working with
management of Crescent Real Estate Equities, Ltd., in developing Crescent
into one of the largest commercial real estate companies in the U.S. During
this period, Crescent has increased its total market capitalization to in
excess of $1.4 billion. In addition to oil and gas, real estate continues
to be a strategic focus area for Rainwater, and continues to represent a
substantial investment in his portfolio.
Darla D. Moore is Chief Executive Officer of Rainwater, Inc. She is a
former managing director of Chemical Bank, where she was the pioneer of
Debtor in Possession (DIP) financing. Kenneth A. Hersh is Chief Investment
Officer of Rainwater, Inc., and also serves as one of the managing partners
of Natural Gas Partners, a group of oil and gas investment funds which will
be participating alongside Rainwater in the purchase. Hersh has been
affiliated with Rainwater since 1989.
Details of the Transaction
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The equity investment will involve the issuance and sale of
approximately 58.8 million shares of convertible preferred stock to
Rainwater and the offering of approximately 58.4 million convertible
preferred shares to MESA shareholders in the rights offering. Rainwater
will provide a standby commitment to purchase any shares of preferred stock
not subscribed to in the rights offering.
Rights will be distributed to common stockholders on a pro rata basis.
The rights will allow the holder to purchase preferred stock at $2.26 per
share, the same per share price at which Rainwater will purchase the
preferred shares. The rights will be transferrable and holders of the
rights will be offered over-subscription privileges for shares not purchased
by other rights holders.
Each preferred share will be convertible into one common share of MESA
Inc. at any time prior to mandatory redemption in 2006. An 8 percent
pay-in-kind dividend will be paid on the preferred shares the first four
years following issuance. Thereafter, the 8 percent dividend may, at the
option of the company, be paid in cash or additional shares depending on
whether certain financial tests are met.
The preferred stock will represent 63.6 percent of the fully diluted
common shares at the time of issuance and 70.6 percent after the mandatory
four-year pay-in-kind period, assuming no other stock issuance by MESA. The
preferred stock will have a liquidation price equal to the purchase price.
The preferred shares purchased in the rights offering will vote with the
common stock as a single class on all matters, except as otherwise required
by law and except for certain special voting rights for shares held by
Rainwater.
Rainwater will be entitled to elect two members of MESA's board of
directors, which will have seven directors. The Rainwater designees will be
Rainwater and Hersh. Pickens, Rainwater and Hersh will constitute a newly
formed executive committee of the board.
During an interim 30-day period, MESA, with assistance from Rainwater,
will seek commitments for new bank loans plus assurance of the availability
of new subordinated debt to be issued in a separate transaction. Proceeds
from the new debt, when combined with proceeds from the newly issued equity
and MESA's available cash balances, would refinance or repay all of MESA's
existing debt.
The proposed transaction is subject to certain conditions, including
definitive agreements, arrangement of the new debt financing, due diligence
and MESA shareholder approval. Pending receipt of satisfactory refinancing
commitments during the interim period, the parties anticipate executing
definitive agreements in about 30 days.
Shareholder Meeting
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The transaction will be submitted to a vote of shareholders at a
special meeting expected to take place in June. The rights offering would
commence promptly after that meeting.
In a settlement agreement reached last September with the Marvin
Davis and Dennis Washington shareholder group, the group agreed not to
solicit proxies at such a special meeting in opposition to a transaction
that meets certain specified criteria. The Rainwater investment is expected
to meet those criteria.
The September 1995 settlement agreement with the shareholder group
also provides that the shareholder group will not propose candidates for
election to MESA's board of directors at its 1996 annual meeting if MESA has
previously consummated a transaction that meets the settlement agreement
criteria. Pursuant to procedures set forth in the settlement agreement, the
1996 annual meeting will be delayed until July, following completion of the
Rainwater transaction.
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