Mandatorily Redeemable Convertible Preferred Units

9 Months Ended

Sep. 30, 2012

Mandatorily Redeemable Convertible Preferred Units

Mandatorily Redeemable Convertible Preferred Units

8. Mandatorily Redeemable Convertible Preferred Units

In December 2011, Holdings LLC, FR Midstates Holdings LLC (“FR Midstates”) and Midstates Petroleum Holdings, Inc. (“Petroleum Inc.”) entered into an amended and restated limited liability company agreement, which was later amended in March 2012, to provide for the issuance of up to 65,000, or $65 million in aggregate value, of certain mandatorily redeemable convertible preferred units (the “Preferred Units”) between December 15, 2011 and June 10, 2015. The Preferred Units had a liquidation value of $1,000 per unit and bore interest, compounded quarterly, at a rate of 8% plus the greater of LIBOR or 1.5%. The Preferred Units were convertible into units of Holdings LLC on or after the one year anniversary of the date of issuance into a number of common units with a fair market value (as determined by the Board of Directors) equal to the liquidation value plus any accrued interest and were redeemable for cash at any time at the option of Holdings LLC, but were mandatorily redeemable for cash on June 10, 2015, unless otherwise converted. In addition, a fixed interest charge of 1.5% of the aggregate capital invested in the Preferred Units was payable upon redemption or conversion.

On January 4, 2012, and again on February 9, 2012, Holdings LLC issued 20,000 Preferred Units (for a total of 40,000 Preferred Units) to FR Midstates for aggregate cash proceeds of $40.0 million. On April 3, 2012, Holdings LLC issued an additional 25,000 preferred units to FR Midstates for aggregate cash proceeds of $25.0 million.

On April 26, 2012, the Company used $67.1 million of the proceeds from its initial public offering to redeem the Preferred Units in full, including interest and other charges. As such, at September 30, 2012, the Preferred Units are no longer outstanding.  The Company recorded $2.1 million related to interest expense associated with these Preferred Units for the nine months ended September 30, 2012.