Founders of ZaZa Energy Corp. (NasdaqCM: ZAZA) agreed to convert $47.3 million in subordinated notes into a combination of common shares and a new series of perpetual preferred stock, the company said Feb. 25.

Shareholders of the notes to be converted will receive about 3.16 million common shares, valued at $0.9495 each, the company said. The amount of shares to be received is based on the volume weighted average price per share for ten trading days preceding the agreement, the company noted.

The new series of perpetual preferred stock has a $12.8 million liquidation preference, the company added. These shares will be issued as Series A cumulative, redeemable preferred stock, based on a $25 per share liquidation preference.

At year-end 2013, Zaza had about $26.3 million, in aggregate principal amount, in senior secured notes outstanding, the company said. It also had about $40 million outstanding in convertible senior notes and about $47.3 million in subordinated notes, the company added.

The senior secured notes’ amount was reduced to $15 million under the release of $11.5 million held in escrow from Hess Corp. (NYSE: HES), the company noted.

Under the current conversion agreement, ZaZa’s debt will be about $55 million, down from $113.6 million at year-end 2013, the company said, noting that the reduction is also partly due to the release of the Hess escrow.

The conversion of the subordinated notes is scheduled to coincide with the refinancing of the senior secured notes, ZaZa said, noting that the conversion is subject to the company’s repayment of the remaining $15 million of senior secured notes.

Houston-based ZaZa Energy is an E&P company focused on the Texas Eagle Ford and Eaglebine areas.