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Publication of Issue Price of 2021 Notes Pursuant to Treas. Reg. Section 1.1273-2(f)(9)
Nuverra Environmental Solutions Inc. (“Nuverra”) is publishing this notice, pursuant to the requirements of Treas. Reg. Section 1.1273-2(f) (the “Regulation”), with respect to its offer to exchange its 9.875% Senior Notes Due 2018 (the “2018 Notes”) for its Second-Lien Notes Due 2021 (the “2021 Notes”) or shares of Nuverra common stock and, in each case if applicable, a pro rata share of penny warrants sufficient to purchase 10% of the shares of Nuverra’s common stock (the “Exchange Offer”). The Exchange Offer closed on April 15, 2016.
The Regulation requires the issuer of a debt instrument to determine whether the debt instrument is “publicly traded” as provided by the Regulation and, if so, the fair market value of the debt instrument. If the issuer determines that such debt instrument is not publicly traded, the Regulation requires the issuer to determine whether property for which the debt instrument was issued (including an existing debt instrument) is publicly traded and, if so, the fair market value of such property.
The Regulation also requires an issuer who has determined that the debt instrument or such property, as applicable, is publicly traded to make that determination as well as the fair market value of that debt instrument or property (which can be stated as the “issue price” of the debt instrument) available to holders in a commercially reasonable fashion, including by electronic publication, within 90 days of the date of issue of the debt instrument.
Pursuant to the requirements of the Regulation, based on information reasonably available to Nuverra, Nuverra hereby notifies the holders of the 2021 Notes that it has determined that:
- The 2021 Notes are not “publicly traded” as provided by the Regulation;
- The 2018 Notes are “publicly traded” as provided by the Regulation; and
- The issue price of the 2021 Notes is 36.385% of their principal amount.
As provided by the Regulation, this determination is binding upon all holders of the 2021 Notes unless the holder explicitly discloses, in accordance with the requirements of the Regulation, that its determination is different from Nuverra’s determination on the holder’s timely filed U.S. federal income tax return for the taxable year that includes its acquisition date of the 2021 Notes.
This notice is only intended to fulfill Nuverra’s notification obligation under the Regulation and does not constitute tax advice. Nuverra advises each holder of the 2021 Notes to consult its own tax adviser regarding the implications of this issue price notice on the determination of the holder’s tax liabilities.
Determination of Whether the 2018 Notes and 2021 Notes Constitute Securities
At the time of the Exchange Offer, Nuverra had not yet determined whether the 2018 Notes and 2021 Notes constitute “securities” for U.S. federal income tax purposes, and provided that holders of 2021 Notes that participated in the Exchange Offer would be notified, including through a website announcement, once this determination was made. Nuverra hereby notifies holders of 2021 Notes that it has determined that neither the 2018 Notes nor the 2021 Notes constitute securities for U.S. federal income tax purposes. Based on the foregoing determination, an exchange of 2018 Notes for 2021 Notes or shares of Nuverra common stock and, in each case if applicable, penny warrants pursuant to the Exchange Offer did not qualify as a recapitalization for U.S. federal income tax purposes. For information regarding the tax treatment of an exchange to an exchanging noteholder, see “Certain United States Federal Income Tax Considerations—Tax Consequences to Exchanging U.S. Noteholders” in the offering memorandum for the Exchange Offer.
The determination of whether the 2018 Notes and 2021 Notes constitute securities does not constitute tax advice. Nuverra advises each holder of 2018 Notes that participated in the Exchange Offer to consult its own tax adviser regarding the U.S. federal income tax treatment of the transactions comprising the Exchange Offer, including the implications of the 2018 Notes and 2021 Notes not constituting securities, and the determination of the holder’s tax liabilities.