Shareholders’ Deficit

3 Months Ended

Mar. 31, 2016

Shareholders’ Deficit

Shareholders’ (Deficit) Equity

7.Shareholders’ Deficit

Common Stock

At March 31, 2016, the Company had 650.0 million Common Shares, par value $0.10 per share, authorized and 202.8 million shares issued and outstanding.

Approximately 0.7 million shares of service-based restricted stock were awarded in the three months ended March 31, 2015. No additional shares of service-based restricted stock were awarded subsequent to March 31, 2015. Refer to Note 8.

The Company has a significant amount of indebtedness that is senior to its existing common stock in its capital structure. As a result, the Company believes that it is highly likely that the shares of its existing common stock will be cancelled in its Chapter 11 proceedings and will be entitled to a limited recovery, if any.  Additionally, as a result of the filing of the Bankruptcy Petitions, the Company’s common stock can no longer be traded on the OTCQB Marketplace and is now trading on the OTC Pink Marketplace.

Preferred Stock

At March 31, 2016, the Company had 10.0 million Series A Preferred Shares, par value $0.01, authorized and 2.5 million shares issued and outstanding.  

The Series A Preferred Shares are convertible into Sabine Common Shares at the option of Legacy Sabine Investors if (1) the Legacy Sabine Investors are able to convert a portion of the Series A Preferred Shares into Common Shares and, as a result of such conversion, would not, together with affiliates, hold more than 50% of the Company’s voting power and (2) Sabine’s board of directors (the “Board”) approves such conversion (such approval not to be unreasonably withheld). In addition, Series A Preferred Shares will convert automatically if the Legacy Sabine Investors transfer such shares to a third party and such third party would not, together with its affiliates, hold more than 50% of the Company’s voting power upon receipt of such shares as voting securities.

The Series A Preferred Shares are non-voting. Initially, in connection with a conversion of Series A Preferred Shares into Common Shares as described in the preceding paragraph, each Series A Preferred Share will be convertible into 100 Common Shares.

The Company has a significant amount of indebtedness that is senior to its existing preferred stock in its capital structure. As a result, the Company believes that it is highly likely that the shares of its existing preferred stock will be cancelled in its Chapter 11 proceedings and will be entitled to a limited recovery, if any.

Incentive Units

The Incentive Units represent the equivalent of stock appreciation rights redeemable for an applicable number of common shares of the Company (based on the value of the common shares) awarded to certain employees and directors of the Company on or before December 16, 2014. The Incentive Units were considered to be equity-based awards with a total grant date fair value of approximately $2.1 million, of which compensation expense will be recognized on a straight line basis over the requisite derived service period. The compensation expense recognized during the three months ended March 31, 2016 was approximately $0.1 million.

The Company has a significant amount of indebtedness that is senior to its existing Incentive Units in its capital structure. As a result, the Company believes that it is highly likely that the shares of its existing Incentive Units will be cancelled in its Chapter 11 proceedings and will be entitled to a limited recovery, if any.