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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 13, 1997
TRANSAMERICAN ENERGY CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
33-85930 76-0441642
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(Commission File Number) (I.R.S. Employer
Identification No.)
1300 North Sam Houston Parkway East, Suite 200
Houston, Texas 77032
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(Address of principal executive offices, including zip code)
(281) 986-8822
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(Registrant's telephone number, including area code)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
TEC NOTES OFFERING. On June 13, 1997, TransAmerican Energy
Corporation ("TEC"), completed a private offering (the "TEC Notes
Offering") of $475 million aggregate principal amount of 11 1/2%
Senior Secured Notes due 2002 (the "TEC Senior Secured Notes") and
$1.13 billion aggregate principal amount of 13% Senior Secured
Discount Notes due 2002 (the "TEC Senior Secured Discount Notes" and,
together with the Senior Secured Notes, the "TEC Notes") for net
proceeds of approximately $1.3 billion. The TEC Notes are senior
obligations of TEC, secured by a lien on substantially all of its
existing and future assets, including the intercompany loans
described below. The TEC Notes Indenture contains certain restrictive
covenants, including, among others, limitations on incurring
additional debt, asset sales, dividends and transactions with
affiliates.
The TEC Senior Secured Notes bear interest at a rate of 11 1/2% per
annum payable semi-annually in cash in arrears on June 15 and
December 15 of each year, commencing December 15, 1997. Principal on
the TEC Senior Secured Discount Notes will accrete to 100% of the
face value thereof by June 15, 1999. Commencing December 15, 1999,
cash interest on the TEC Senior Secured Discount Notes will be
payable semi-annually in arrears on June 15 and December 15 of each
year at a rate of 13% per annum. The TEC Notes will mature on June
15, 2002. The TEC Notes are not redeemable prior to June 15, 2000,
except that the Company may redeem, at its option, prior to June 15,
2000, up to 35% of the original aggregate principal amount of the TEC
Senior Secured Notes and up to 35% of the accreted value of the TEC
Senior Secured Discount Notes, at the redemption prices set forth in
the indenture governing the TEC Notes (the "TEC Notes Indenture"),
plus accrued and unpaid interest, if any, to and including the date
of redemption, with the net proceeds of any equity offering. On or
after June 15, 2000, the Notes will be redeemable at the option of
TEC, in whole or in part, at the redemption prices set forth in the
TEC Notes Indenture, plus accrued and unpaid interest, if any, to and
including the date of redemption. TEC will be obligated, subject to
certain
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conditions, to make an offer to purchase TEC Notes with Excess Cash
(as defined) at a price equal to 105% of the principal amount of
accreted value thereof, as applicable, if such purchase occurs on or
prior to December 31, 1997, at a price equal to 108% of the principal
amount or accreted value thereof, as applicable, if such purchase
occurs during the period from January 1, 1998 through June 14, 2000,
and thereafter at the redemption prices set forth in the TEC Notes
Indenture in each case, together with accrued and unpaid interest, if
any, to and including the date of purchase.
INTERCOMPANY LOANS TO TRANSTEXAS AND TARC. With the proceeds of the
TEC Notes Offering, TEC made intercompany loans to TransTexas Gas
Corporation ("TTXG") in the principal amount of $450 million (the
"TransTexas Intercompany Loan") and to TransAmerican Refining
Corporation ("TARC") in the original amount of $676 million (the
"TARC Intercompany Loan"). The promissory note evidencing the
TransTexas Intercompany Loan (i) bears interest at a rate of 10 7/8%
per annum, payable semi-annually in cash in arrears and (ii) is
secured initially by a security interest in substantially all of the
assets of TransTexas including the TransTexas Disbursement Account
(described below), but excluding inventory, receivables and
equipment. The promissory note evidencing the TARC Intercompany Loan
(i) accretes principal at a rate of 16% per annum, compounded
semi-annually, until June 15, 1999 to a final accreted value of $920
million, and thereafter pays interest semi-annually in cash in
arrears on the accreted value thereof, at a rate of 16% per annum and
(ii) is secured initially by a security interest in substantially all
of TARC's assets including the Disbursement Account (described below)
but excluding inventory, receivables and equipment. Each Intercompany
Loan will mature on June 1, 2002. The Intercompany Loan agreements
contain certain restrictive covenants, including, among others,
limitations on incurring additional debt, asset sales, dividends and
transactions with affiliates. TARC used approximately $103 million of
the proceeds of the TARC Intercompany Loan to repay certain
indebtedness including senior secured notes of TARC that were issued
in March 1997 and debt owed to an affiliate, and to complete the TARC
Notes Tender Offer described below. Remaining proceeds will be used
for TARC's Capital Improvement Program and for general corporate
purposes.
Upon the occurrence of a Change of Control (as defined in the TEC
Notes Indenture), TEC will be required to make an offer to purchase
all of the outstanding TEC Notes at a price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest,
if any, or, in the case of any such offer to purchase TEC Senior
Secured Discount Notes prior to June 15, 1999, at a price equal to
101% of the accreted value thereof, in each case, to and including
the date of purchase. Pursuant to the terms of the Intercompany
Loans, TEC may require TARC and TransTexas to pay a pro rata share of
the purchase price paid by TEC.
TARC WARRANTS TENDER OFFER. On June 13, 1997, TEC completed a tender
offer for the outstanding common stock purchase warrants of TARC
("TARC Warrants") at a price of $4.50 per warrant. Pursuant to the
tender offer, TEC purchased 7,335,452 TARC Warrants for an aggregate
purchase price of
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approximately $33 million. TARC intends to enter into a merger with
one of its affiliates pursuant to which each remaining warrant would
become exercisable (at an exercise price of $.01) to receive $4.51 of
cash instead of one share of common stock of TARC.
TARC EQUITY CONTRIBUTION. TEC intends to make a capital contribution
to TARC in the amount of $226 million from the proceeds of the
TransTexas stock repurchase program (discussed below). The amount of
this capital contribution will be retained initially in the
Disbursement Account and contributed to TARC pursuant to the terms of
the Disbursement Agreement.
DIVIDEND TO TRANSAMERICAN. TEC paid a dividend to TransAmerican in
the amount of $23 million. A portion of the dividend was used to
repay the debt of an affiliate, which had been secured by a pledge of
3.7 million shares of TransTexas common stock. In connection with the
TEC Notes Offering, TransAmerican contributed the 3.7 million shares
of TransTexas common stock to TEC.
TEC PREFERRED STOCK REDEMPTION. On June 17, 1997, TEC redeemed all of
its outstanding preferred stock for an aggregate amount of $100,000,
plus accrued and unpaid dividends.
LOBO SALE. On May 29, 1997, TransTexas entered into and consummated a
stock purchase agreement with an unaffiliated buyer (the "Lobo Sale
Agreement"), with an effective date of March 1, 1997, to effect the
sale (the "Lobo Sale") of the stock of TTC, its subsidiary that owned
substantially all of TransTexas' Lobo Trend producing properties and
related pipeline transmission system for a sales price of
approximately $1.1 billion, subject to adjustments as provided for in
the Lobo Sale Agreement. Purchase price adjustments were made for,
among other things: the value of certain NGLs and stored
hydrocarbons; the value of gas in TTC's pipeline; prepaid expenses
relating to post-effective date operations; post-closing expenses
related to pre-closing operations; the value of oil and gas produced
and sold between the effective date of the Lobo Sale Agreement and
closing (approximately $44 million); property defects; and estimated
costs associated with liabilities discovered before closing. Purchase
price adjustments made at the closing of the Lobo Sale are subject to
a review, reconciliation and resolution process, which is expected to
be completed within 105 days following the closing. With proceeds
from the Lobo Sale, TransTexas repaid certain indebtedness and other
obligations, including production payments, in an aggregate amount of
approximately $84 million. The remaining net proceeds have been or
will be used for the repurchase or redemption of the Senior Secured
Notes, and for general corporate purposes.
TRANSTEXAS SENIOR SECURED NOTES TENDER OFFER. On June 13, 1997,
TransTexas completed a tender offer for its TransTexas Senior Secured
Notes for 111 1/2% of their principal amount (plus accrued and unpaid
interest). Approximately $785.4 million principal amount of Senior
Secured Notes were tendered and accepted by
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TransTexas. On June 30, 1997, TransTexas redeemed the remaining
Senior Secured Notes pursuant to the terms of the Senior Secured
Notes Indenture.
TRANSTEXAS SUBORDINATED NOTES EXCHANGE OFFER. On June 19, 1997,
TransTexas completed an exchange offer, pursuant to which it
exchanged approximately $115.8 million aggregate principal amount of
its 13 3/4% Senior Subordinated Notes due 2001 (the "TransTexas
Subordinated Exchange Notes") for all of its outstanding 13 1/4%
Senior Subordinated Notes due 2003 (the "TransTexas Subordinated
Notes"). The indenture governing the TransTexas Subordinated Exchange
Notes (the "Subordinated Notes Indenture") contains certain
restrictive covenants, including, among others, limitations on
incurring additional debt, asset sales, dividends and transactions
with affiliates.
As a result of the Lobo Sale, the Tender Offer and the Exchange
Offer, TransTexas expects to record a pretax gain of approximately
$600 million and a pretax extraordinary charge of approximately $120
million during the quarter ending July 31, 1997.
TRANSTEXAS STOCK REPURCHASE PROGRAM. TransTexas has implemented a
stock repurchase program pursuant to which it plans to repurchase
common stock from its public stockholders and from its affiliates,
including TEC and TARC. It is anticipated that TransTexas will
acquire four times the number of shares from its affiliated
stockholders that it acquires from its public stockholders. Shares
may be purchased through open market purchases, negotiated
transactions or tender offers, or a combination of the above. It is
anticipated that the price paid to affiliated stockholders will equal
the weighted average price paid to purchase shares from the public
stockholders. Approximately $400 million from the proceeds of the
TransTexas Intercompany Loan was deposited in a disbursement account
to fund the stock repurchase program. Funds from the disbursement
account may also be used to pay dividends on TransTexas common stock.
As of July 31, 1997, TransTexas had purchased approximately $49.6
million in value of common stock from the public.
TARC NOTES TENDER OFFER. On June 13, 1997, TARC completed a tender
offer (the "TARC Notes Tender Offer") for the (i) TARC Mortgage Notes
for 112% of their principal amount (plus accrued and unpaid
interest), and (ii) TARC Discount Notes for 112% of their accreted
value. In connection with the TARC Notes Tender Offer, TARC has
obtained consents from holders of the TARC Notes to certain waivers
under, and amendments to the indenture governing the TARC Notes (the
"TARC Notes Indenture"), which eliminate or modify certain of the
covenants and other provisions contained in the TARC Notes Indenture.
Approximately $423 million aggregate principal amount of TARC
Mortgage Notes and TARC Discount Notes were tendered and accepted by
TARC at a cost to TARC of approximately $437 million (including
accrued interest and premiums).
TARC CAPITAL IMPROVEMENT PROGRAM. In connection with the TEC Notes
Offering, the TARC Intercompany Loan and the TARC Notes Tender Offer,
TARC has
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adopted a revised capital improvement program designed to increase
the capacity and complexity of the refinery ("Capital Improvement
Program"). The most significant projects include: (i) conversion of
the visbreaker unit to a delayed coking unit to process vacuum tower
bottoms into lighter petroleum products, (ii) modernization and
upgrade of a fluid catalytic cracking unit to increase gasoline
production capacity and allow the direct processing of low cost
atmospheric residual feedstocks, and (iii) upgrading and expanding
hydro treating, alkylation and sulfur recovery units to increase sour
crude processing capacity. In addition, TARC plans to expand, modify
and add other processing units, tankage and offsite facilities as
part of the Capital Improvement Program. The Capital Improvement
Program includes expenditures necessary to ensure that the refinery
is in compliance with certain existing air and water discharge
regulations and that gasoline produced will comply with federal
standards. TARC will act as general contractor, but has engaged a
number of specialty consultants and engineering and construction
firms to assist TARC in completing the individual projects that
comprise the Capital Improvement Program. Each of these firms was
selected because of its specialized expertise in a particular process
or unit integral to the Capital Improvement Program.
The Capital Improvement Program will be executed in two phases. TARC
estimates that Phase I will be completed at a cost of $223 million,
will be tested and operational by September 30, 1998 and will result
in the refinery having the capacity to process up to 200,000 BPD of
sour crude oil. Phase II of the Capital Improvement Program includes
the completion and start-up of the Fluid Catalytic Cracking Unit
utilizing state-of-the-art MSCC(SM) technology and the installation of
additional equipment expected to further improve operating margins by
allowing for a significant increase in the refinery's capacity to
produce gasoline. TARC estimates that Phase II will be completed at a
cost of $204 million and will be tested and operational by July 31,
1999. The proceeds received or to be received by TARC from the TARC
Intercompany Loan, the TransTexas stock repurchase program and the
equity contribution from TEC will include $427 million designated for
use in the Capital Improvement Program, which TARC believes is
adequate to fund the completion of the project. The foregoing
estimates, as well as other estimates and projections herein, are
subject to substantial revision upon the occurrence of future events,
such as unavailability of financing, engineering problems, work
stoppages and cost overruns over which TARC may not have any control,
and there can be no assurance that any such projections or estimates
will prove accurate.
DISBURSEMENT AND COLLATERAL ACCOUNTS. Pursuant to a disbursement
agreement (the "Disbursement Agreement") among TARC, TEC, the TEC
Indenture Trustee, Firstar Bank of Minnesota, as disbursement agent
(the "Disbursement Agent"), and Baker & O'Brien, Inc., as
construction supervisor (the "Construction Supervisor"), $208 million
of the net proceeds from the sale of the TEC Notes was placed into
accounts in the name of TARC and TEC (together, the "Disbursement
Account") to be held and invested by the Disbursement Agent until
needed from time to time to fund the Capital Improvement Program and
TARC's operating expenses and working capital. Proceeds to TEC and
TARC of approximately $300 million from
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the TransTexas stock repurchase program will also be deposited in the
Disbursement Account.
The Disbursement Agent will make disbursements for the Capital
Improvement Program out of the Disbursement Account in accordance
with requests made by TARC and approved by the Construction
Supervisor. The Construction Supervisor is required to review each
such disbursement request by TARC. No disbursements may be made from
the Disbursement Account for purposes other than the Capital
Improvement Program other than (i) up to $1.5 million per month
(except for December 1997, in which disbursements may be up to $4.5
million) to fund administrative costs and certain taxes and insurance
payments, not in excess of $25.5 million in the aggregate; provided,
that if less than $1.5 million is spent in any month (or less than
$4.5 million is spent in December 1997) the amounts which may be
disbursed in one or more subsequent months will be increased by the
amount of such difference, (ii) up to $50 million for feedstock upon
certification by the Construction Supervisor that TARC has
satisfactorily completed construction of the Delayed Coking Unit and
associated facilities, (ii) up to $19 million to pay interest on, and
to redeem, repurchase, defease or otherwise retire the remaining TARC
Notes and (iv) an initial disbursement of approximately $7 million.
In addition, interest income from the Disbursement Account may be
used for the Capital Improvement Program or disbursed to fund
administrative and other costs of TARC and TEC.
Pursuant to a disbursement agreement (the "TransTexas Disbursement
Agreement") among TransTexas, TEC, the TEC Indenture Trustee, and
Firstar Bank of Minnesota, N.A. as disbursement agent, approximately
$400 million of the proceeds of the TransTexas Intercompany Loan was
placed in an account (the "TransTexas Disbursement Account") to be
held and invested by the disbursement agent until disbursed. Funds in
the TransTexas Disbursement Account will be disbursed to TransTexas
as needed to fund the stock repurchase program. In addition,
TransTexas may at any time request disbursement of interest earned on
the funds in the TransTexas Disbursement Account.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements, pro forma financial information
and exhibits are filed as a part of this report:
(a) Financial Statements of Businesses Acquired:
Not applicable.
(b) Pro forma financial information:
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(1) Pro Forma Condensed Consolidated Balance Sheet dated April
30, 1997 (unaudited)
(2) Pro Forma Condensed Consolidated Statement of Operations
for the three months ended April 30, 1997 (unaudited) and
for the year ended January 31, 1997 (unaudited).
(c) Exhibits:
3.1 Certificate of Amendment dated June 5, 1997 to Certificate of
Incorporation of the Company.
3.2 Certificate of Amendment dated July 2, 1997 to Certificate of
Incorporation of the Company.
4.1 Second Supplemental Indenture dated June 13, 1997 among TARC, as
issuer, the Company, as guarantor, and First Union National
Bank, as trustee.
4.2 Indenture dated June 13, 1997 among the Company, as issuer, and
Firstar Bank of Minnesota, as trustee.
4.3 Security and Pledge Agreement dated June 13, 1997 by the Company
in favor of Firstar Bank of Minnesota, as trustee.
4.4 Registration Rights Agreement dated June 5, 1997.
4.5 Loan Agreement dated June 13, 1997 between TransTexas and the
Company.
4.6 Loan Agreement dated June 13, 1997 between TARC and the
Company.
4.7 Security and Pledge Agreement dated June 13, 1997 by TransTexas
in favor of the Company.
4.8 Security and Pledge Agreement dated June 13, 1997 by TARC in
favor of the Company.
4.9 Disbursement Agreement dated June 13, 1997 among TARC, the
Company, Firstar Bank of Minnesota, as disbursement agent and
trustee, and Baker & O'Brien, as construction supervisor.
4.10 Disbursement Agreement dated June 13, 1997 among TransTexas,
the Company and Firstar Bank of Minnesota, as disbursement agent
and trustee.
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ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable.
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PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
OF TRANSAMERICAN ENERGY CORPORATION
The following unaudited pro forma condensed consolidated financial
information of TransAmerican Energy Corporation (the "Company") as of and for
the three months ended April 30, 1997 and for the year ended January 31, 1997,
illustrates the effect of the sale of TransTexas Transmission Corporation
("Lobo Sale") and the transactions described in Item 5 of this Form 8-K (and
defined as the "Transactions") related to a private offering of debt securities
by the Company (the "TEC Notes Offering"). The unaudited pro forma condensed
consolidated balance sheet has been prepared assuming that the Lobo Sale, the
TEC Notes Offering and the Transactions were consummated on April 30, 1997. The
unaudited pro forma condensed consolidated statements of operations for the
three months ended April 30, 1997 and for the year ended January 31, 1997 have
been prepared assuming that the Lobo Sale, the TEC Notes Offering and the
Transactions were consummated on February 1, 1997 and 1996, respectively.
The unaudited pro forma adjustments and the resulting unaudited pro forma
condensed consolidated financial information are based on the assumptions noted
in the footnotes thereto. The unaudited pro forma condensed consolidated
financial information does not purport to represent what the Company's
financial position or results of operations would have been had the Lobo Sale,
the TEC Notes Offering and the Transactions actually occurred on the dates
indicated or the financial position or results of operations for any future
date or period.
The unaudited pro forma condensed consolidated financial information and
notes thereto should be read in conjunction with the Company's historical
financial statements and the notes thereto included in the Company's quarterly
report on Form 10-Q for the period ended April 30, 1997 and its annual report
on Form 10-K for the period ended January 31, 1997.
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TRANSAMERICAN ENERGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
HISTORICAL ADJUSTMENTS PRO FORMA
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ASSETS
Current assets:
Cash and cash equivalents.............................. $ 12,997 $ 1,398,760 (a) $ 323,083
63,961 (b)
1,073,424 (c)
(2,226,059)(d)
Cash restricted for interest - TransTexas.............. 46,000 (46,000)(a) --
Debt proceeds held in collateral account - TARC........ 14,037 -- 14,037
Accounts receivable.................................... 30,327 -- 30,327
Receivable from affiliates............................. 63,961 (63,961)(b) --
Inventories............................................ 15,164 -- 15,164
Other current assets................................... 14,197 -- 14,197
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Total current assets........................... 196,683 200,125 396,808
Net property and equipment................................ 1,476,902 (450,592)(c) 1,026,310
Disbursement accounts..................................... -- 479,795 (d) 479,795
Other assets, net......................................... 42,102 56,500 (d) 66,404
(32,198)(e)
Deferred tax asset........................................ -- 21,987 (h) 21,987
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$1,715,687 $ 275,617 $1,991,304
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LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt................... $ 8,406 $ -- $ 8,406
Revolving credit agreement............................. 8,386 -- 8,386
Accounts payable....................................... 77,451 -- 77,451
Payable to affiliate................................... 1,972 (1,972)(d) --
Accrued liabilities.................................... 116,986 (13,879)(d) 64,511
(38,596)(d)
Notes payable.......................................... 36,000 (36,000)(d) --
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Total current liabilities...................... 249,201 (90,447) 158,754
Due to affiliates......................................... 14,292 (3,398)(d) 85,894
205,000 (g)
(130,000)(i)
Notes payable to affiliate................................ 60,630 (60,630)(d) --
Production payments, less current portion................. 25,362 (7,212)(d) 18,150
Long-term debt, less current maturities................... 1,297,048 475,000 (a) 1,496,785
877,760 (a)
(800,000)(d)
(364,452)(d)
11,429 (f)
Deferred revenue.......................................... 46,176 (46,176)(d) --
Deferred income taxes..................................... 35,542 (57,529)(g) --
21,987 (h)
Other liabilities......................................... 8,934 (1,309)(d) 7,625
Redeemable preferred stock, $0.01 par value, 10,000 shares
authorized; Series A - 1,000 shares issued
and outstanding........................................ 96 (96)(d) --
Stockholder's equity (deficit):
Common stock, $0.01 par value, 100,000 shares
authorized; 9,000 shares issued and outstanding...... -- -- --
Additional paid-in capital............................. 158,535 (4)(d) 254,961
(33,570)(d)
130,000 (i)
Accumulated deficit.................................... (180,129) 149,264 (j) (30,865)
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Total stockholder's equity (deficit)................. (21,594) 245,690 224,096
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$1,715,687 $ 275,617 $1,991,304
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The accompanying notes are an integral part of the pro forma financial
statements.
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TRANSAMERICAN ENERGY CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) To record the proceeds from the TEC Notes Offering and release of the
restricted cash originally required by the TransTexas Senior Secured Notes
Indenture.
TEC Senior Secured Notes.................... $ 475,000
TEC Senior Secured Discount Notes........... 877,760
Release of restricted cash.................. 46,000
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$ 1,398,760
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(b) To record the collection of amounts due from affiliates.
(c) To record the Lobo Sale for a purchase price of $1,073.4 million.
Cash proceeds............................... $ 1,073,424
Carrying value of stock sold................ (450,592)
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Pretax gain on Lobo Sale................ $ 622,832 (j)
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Purchase price adjustments were made for, among other things: the value of
certain NGLs and stored hydrocarbons; the value of gas in TTC's pipeline;
prepaid expenses relating to post-effective date operations; post-closing
expenses related to pre-closing operations; the value of oil and gas
produced and sold between the effective date of the Lobo Sale and the
closing (approximately $44 million); property defects; and estimated costs
associated with liabilities incurred before closing. Purchase price
adjustments made at the closing of the Lobo Sale are subject to a review,
reconciliation and resolution process, which is expected to be completed
within 105 days following the closing.
(d) To record the application of a portion of the proceeds from (a) through
(c).
Repurchase of TransTexas Senior Secured Notes................ $ 800,000
Premium of 11.5% for TransTexas Senior Secured Notes......... 92,000(j)
Repurchase of 96% of TARC Notes.............................. 364,452
Premium of 12% for 96% of TARC Notes......................... 43,734(j)
Lobo Sale production repayment............................... 43,806(j)
Repayment of TransTexas volumetric production payments
(deferred revenue), dollar-denominated production
payments and other debt.................................. 68,576
Payment of TARC notes payable................................ 36,000
Payment of accrued interest.................................. 38,596
Payment of TARC notes payable to affiliates ($60,630) and
due to affiliates ($5,370)............................... 66,000
Debt issuance fees........................................... 56,500
TEC Preferred Stock Redemption............................... 100
TransTexas Stock Repurchase Program.......................... 79,930(j)
Disbursement accounts ($253,795-- TARC, $226,000-- TEC)...... 479,795
Purchase of TARC Warrants.................................... 33,570
Dividend to TransAmerican.................................... 23,000(j)
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$2,226,059
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Pending completion of the TransTexas Stock Repurchase Program, up to $400
million of proceeds from the TEC Notes Offering and the Transactions will
be held by TransTexas in a restricted cash account.
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Such proceeds will be disbursed from such account (i) for purposes of the
TransTexas Stock Repurchase Program or (ii) upon completion of Phase II of
the Capital Improvement Program for general corporate purposes.
Approximately $16 million was used to pay accrued interest, accretion of
principal and premium on such accretion on the TARC Notes tendered in the
TARC Notes Tender Offer for the period from May 1, 1997 through June 13,
1997.
In addition to the above, proceeds of approximately $11 million was used
to pay accrued interest on the TransTexas Senior Secured Notes for the
period from May 1, 1997 through June 13, 1997.
During the months of April and May 1997, TransTexas obtained additional
financing in the aggregate amount of approximately $49.5 million, of which
approximately $29.2 million remained outstanding at June 30, 1997.
(e) To write off TransTexas and TARC unamortized debt issuance costs. See (j).
(f) To record the premium attributable to the TransTexas Subordinated Notes
Exchange Offer. See (j).
(g) To record the income tax effects of the Lobo Sale and of expenses related
to the TransTexas Senior Secured Notes Tender Offer.
Payable to TransAmerican pursuant to the Tax Allocation
Agreement............................................. $ 205,000
Deferred income taxes..................................... (57,529)
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$ 147,471 (j)
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(h) To reclassify deferred tax assets.
(i) To record the assumption of $130 million of estimated tax liability by
TransAmerican in accordance with the Tax Allocation Agreement.
(j) To record the effects on retained earnings of pro forma adjustments (a)
through (i).
Pretax gain on Lobo Sale.................................... $ 622,832
Premium of 11.5% for TransTexas Senior Secured Notes........ (92,000)(1)
Lobo Sale production repayment.............................. (43,806)
Premium attributable to the TransTexas Subordinated Notes
Exchange Offer.......................................... (11,429)(1)
Unamortized debt issuance costs............................. (32,198)(1)
Federal income taxes........................................ (147,471)
Premium of 12% for the TARC Notes repurchased............... (43,734)(1)
Dividend to TransAmerican................................... (23,000)
TransTexas Stock Repurchase Program......................... (79,930)
---------
$ 149,264
=========
--------------
(1) These amounts and the related income tax effects will be recorded as
an extraordinary charge to income in the period that the related debt
is extinguished.
13
14
TRANSAMERICAN ENERGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
Historical Adjustments Pro Forma
----------- ----------- ----------
Revenues:
Gas, condensate and natural gas liquids......... $ 72,649 $ (36,862)(a) $ 35,787
Transportation.................................. 9,291 (9,291)(a) --
Other........................................... 100 -- 100 (f)
----------- ----------- ----------
Total revenues............................. 82,040 (46,153) 35,887
----------- ----------- ----------
Costs and expenses:
Operating....................................... 35,437 (21,936)(a) 13,501
Depreciation, depletion and amortization........ 35,268 (14,408)(a) 20,860
General and administrative...................... 17,852 (7,688)(a) 10,789
625 (d)
Taxes other than income taxes................... 6,118 (2,450)(a) 3,668
----------- ----------- ----------
Total costs and expenses................... 94,675 (45,857) 48,818 (f)
----------- ----------- ----------
Operating loss............................. (12,635) (296) (12,931)
----------- ----------- ----------
Other income (expense):
Interest income................................. 1,821 -- 1,821
Interest expense, net........................... (28,654) (3,039)(b) (31,693)
Other, net...................................... 39 -- 39
----------- ----------- ----------
Total other income (expense)............... (26,794) (3,039) (29,833)
----------- ----------- ----------
Loss before income taxes................... (39,429) (3,335) (42,764)
Income tax expense (benefit)......................... (7,828) 3,272 (c) (4,556)
----------- ----------- ----------
Net loss before preferred stock dividend... $ (31,601) $ (6,607) $ (38,208)
=========== =========== ==========
Series A preferred stock dividend.................... $ 19 $ (19)(e) $ --
=========== =========== ==========
Net loss available for common stockholder............ $ (31,620) $ (6,588) $ (38,208)
=========== =========== ==========
Net loss per share................................... $ (3,513) $ (4,245)
=========== ==========
Weighted average number of common
shares outstanding.............................. 9,000 9,000
=========== ==========
The accompanying notes are an integral part of the pro forma financial
statements.
14
15
TRANSAMERICAN ENERGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
Historical Adjustments Pro Forma
----------- ----------- ----------
Revenues:
Gas, condensate and natural gas liquids......... $ 360,740 $ (173,761)(a) $ 186,979
Transportation.................................. 34,423 (34,423)(a) --
Product sales................................... 10,857 -- 10,857
Gains on the sale of assets..................... 7,856 -- 7,856
Other........................................... 297 -- 297 (f)
----------- ----------- ----------
Total revenues.............................. 414,173 (208,184) 205,989
----------- ----------- ----------
Costs and expenses:
Operating....................................... 154,313 (97,494)(a) 56,819
Depreciation, depletion and amortization........ 139,678 (78,932)(a) 60,746
General and administrative...................... 57,500 (2,000)(a) 58,000
2,500 (d)
Taxes other than income taxes................... 26,772 (12,818)(a) 13,954
Litigation settlements.......................... (96,000) -- (96,000)
----------- ----------- ----------
Total costs and expenses.................... 282,263 (188,744) 93,519 (f)
----------- ----------- ----------
Operating income............................ 131,910 (19,440) 112,470
----------- ----------- ----------
Other income (expense):
Interest income................................. 5,748 -- 5,748
Interest expense, net........................... (101,670) (35,123)(b) (136,793)
Other, net...................................... 42,980 -- 42,980
----------- ----------- ----------
Total other income (expense)................ (52,942) (35,123) (88,065)
----------- ----------- ----------
Income (loss) before income taxes........... 78,968 (54,563) 24,405
Income taxes......................................... 12,491 23,644 (c) 36,135
----------- ----------- ----------
Net income (loss) before preferred
stock dividend.............................. $ 66,477 $ ( 78,207) $ (11,730)
=========== =========== ==========
Series A preferred stock dividend.................... $ 19 $ (19)(e) $ --
=========== =========== ==========
Net income (loss) available for common stockholder... $ 66,458 $ (78,188) $ (11,730)
=========== =========== ==========
Net income (loss) per share.......................... $ 7,384 $ (1,303)
=========== ==========
Weighted average number of common
shares outstanding.............................. 9,000 9,000
=========== ==========
The accompanying notes are an integral part of the pro forma financial
statements.
15
16
TRANSAMERICAN ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) To adjust revenues, including losses relating to risk management
activities, operating expenses, depreciation, depletion and amortization,
general and administrative and taxes other than income taxes as a result
of the Lobo Sale.
(b) To adjust interest expense as follows:
Three Months
Ended Year Ended
April 30, 1997 January 31, 1997
-------------- ----------------
Historical interest on TransTexas Senior Secured Notes...... $ (23,000) $ (92,000)
Historical interest on TransTexas other debt................ (634) (2,500)
Historical interest on TARC Notes repurchased............... (17,325) (62,999)
Historical interest on TransTexas Subordinated Notes........ (3,294) (1,646)
Historical interest on TARC intercompany debt............... (2,038) (2,237)
Historical interest on TARC notes payable................... (705) --
Interest on TransTexas Subordinated Exchange Notes.......... 3,981 15,925
Interest expense on TEC Senior Secured Notes................ 13,656 54,625
Interest expense on TEC Senior Secured Discount Notes (1)... 26,041 99,598
Interest expense on estimated federal income tax liability
payable to affiliate at an assumed rate of 9%............ 1,688 6,750
Amortization of historical debt issuance costs.............. (1,806) (5,461)
Amortization of estimated debt issuance costs............... 2,825 11,300
Reduction in capitalized interest........................... 3,650 13,768
---------- ----------
$ 3,039 $ 35,123
========== ==========
--------------
(1) Based on actual debt outstanding at April 30, 1997 and January 31,
1997. Pro forma interest expense on the entire amount of Senior
Secured Discount Notes is approximately $28.5 million and $118.6
million at April 30, 1997 and January 31, 1997, respectively.
(c) To record income tax expense based on the combined pro forma income tax
expense of TransTexas and TARC in accordance with the Tax Allocation
Agreement.
(d) To record the fee for advisory services and other benefits to be paid
annually to TransAmerican pursuant to the Services Agreement.
(e) To eliminate the dividend on the TEC Preferred Stock which was redeemed.
(f) Does not include revenues and related expenses attributable to the
Agreement for Services between TransTexas and Conoco Inc.
16
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRANSAMERICAN ENERGY CORPORATION
By /s/ ED DONAHUE
------------------------------------
Name: Ed Donahue
Title: Vice President and Chief
Financial Officer
Dated: August 15, 1997
17
18
EXHIBITS
Exhibit
No. Description
------- -----------
3.1 Certificate of Amendment dated June 5, 1997 to Certificate of
Incorporation of the Company.
3.2 Certificate of Amendment dated July 2, 1997 to Certificate of
Incorporation of the Company.
4.1 Second Supplemental Indenture dated June 13, 1997 among TARC,
as issuer, the Company, as guarantor, and First Union
National Bank, as trustee.
4.2 Indenture dated June 13, 1997 among the Company, as issuer,
and Firstar Bank of Minnesota, as trustee.
4.3 Security and Pledge Agreement dated June 13, 1997 by the
Company in favor of Firstar Bank of Minnesota, as trustee.
4.4 Registration Rights Agreement dated June 5, 1997.
4.5 Loan Agreement dated June 13, 1997 between TransTexas and the
Company.
4.6 Loan Agreement dated June 13, 1997 between TARC and the
Company.
4.7 Security and Pledge Agreement dated June 13, 1997 by
TransTexas in favor of the Company.
4.8 Security and Pledge Agreement dated June 13, 1997 by TARC in
favor of the Company.
4.9 Disbursement Agreement dated June 13, 1997 among TARC, the
Company, Firstar Bank of Minnesota, as disbursement agent and
trustee, and Baker & O'Brien, as construction supervisor.
4.10 Disbursement Agreement dated June 13, 1997 among TransTexas,
the Company and Firstar Bank of Minnesota, as disbursement
agent and trustee.