Marquez controls slightly more than 50% of Venoco, an oil and gas exploration and development company based in Denver with operations in California and Texas.

At $12.50 per share, the buyout is conditioned on financing. Venoco said Wednesday, June 20, that Marquez informed it he has a "highly confident" letter for a portion of the $400 million financing for the proposed deal. The letter is not binding and is conditioned on various matters including continued due diligence. The proxy for the buyout offers generalities about what shape the financing might take, including that it is expected to include debt issuance at the parent level, meaning Marquez's investment vehicle, and debt at the company level. The portion of the financing related to the letter is the parent issuance. The amount of the total $400 million that this represents has not been disclosed.

Risk arbitrageurs were looking for greater assurances regarding financing for the buyout, which was launched Jan. 16 and received shareholder approval on June 5. It has an Oct. 16 termination date. The deal received approval of the majority of shares not controlled by Marquez. Because Marquez already holds a majority of Venoco shares, the buyout does not trigger a change of control, and Venoco's $650 million of existing notes do not have to be taken out.

The merger agreement required that Marquez provide a debt commitment satisfactory to the Venoco special committee by June 12. On that date, the Venoco special committee allowed Marquez an extension until July 20 for that requirement. The special committee said at that time that "significant progress" has been made toward obtaining financing, including a signed term sheet. The extension of that deadline requires that Marquez "not unreasonably reject" financing -- that he takes what he can get. If the deal breaks down, Marquez is also now on the hook for up to $4 million of expense reimbursements to Venoco.

Merely receiving a highly confident letter for just a portion of the financing is not the outcome arbs were looking for at this juncture. The fact that Venoco thought that minimal level of commitment was worthy of a press release only adds to the discomfort.

Venoco shares gave up 75 cents by midday trading Thursday to change hands for $10.25 at a spread of $2.25, or 22%, to their value in the buyout.

The leads on the financing are Citigroup Inc. and BMO Capital Markets, a Venoco spokesman said. BMO is the lead on Venoco's existing revolving credit facility. Bank of Nova Scotia and Royal Bank of Scotland Group plc are also lenders for that facility.