⛽️New Chapter 11 Bankruptcy Filing - Sheridan Holding Company II, LLC⛽️

Sheridan Holding Company II, LLC

September 15, 2019

Houston-based Sheridan Holding Company II LLC and 8 affiliated debtors filed a chapter 11 bankruptcy case in the Southern District of Texas with a nearly-fully-consensual prepackaged plan of reorganization. The plan, once effective, would eliminate approximately $900mm(!) of pre-petition debt. The case is supported by a $100mm DIP credit facility (50% new money).

Why so much debt? While this is an oil and gas story much like scores of other companies we’ve seen march through the bankruptcy court doors, the business model, here, is a bit different than usual. Sheridan II is a “fund”; it invests in a portfolio of working interests in mature onshore producing properties in Texas, New Mexico and Wyoming. Like Matt Damon in “Promised Land,” the debtors scour God’s country in search of properties, acquires working interests in those properties, and then seeks to deploy their special sauce (“application of cost-effective reinvestments, operational improvements, and enhanced recovery programs to the acquired assets”) to eke out product and, ultimately, sell that sh*t at a profit. This, as you might suspect, requires a bunch of capital (and equity from LPs like Warburg Pincus).* Hence the $1.1b of debt on balance sheet. All of this is well (pun intended) and good, provided the commodity environment cooperates. Which, we all know all too well, has not been the case in recent years. Peace out equity. Peace out sub debt.

Interestingly, some of that debt was placed not too long ago. Confronted with the oil and gas downturn, the debtors took the initiative to avoid bankruptcy; they cut off distributions to LPs, took measures to decrease debt, cut opex, capex and SG&A, and engaged in a hedging program. In 2017, the debtors raised $455mm of the subordinated term loan (with PIK interest galore), while also clawing back 50% of distributions previously made to LPs to the tune of $64mm. Everyone needed to have skin in the game. Alas, these measures were insufficient.

Per this plan, that skin is seared. The revolving lenders and term lenders will receive 95% of the common stock in the reorganized entity with the subordinated term lenders getting the remaining 5%. YIKES. The debtors estimate that the subordinated term lenders will recover 2.6% of the amount of their claims under the proposed plan. 2.6% of $514mm = EPIC VALUE DESTRUCTION. Sweeeeeeeeet. Of course, the limited partners are wistfully looking at that 2.6%. Everything is relative.

*****

Some additional notes about this case:

  • The hope to have confirmation in 30 days.

  • The plan includes the ability to “toggle” to a sale pursuant to a plan if a buyer for the assets emerges. These “toggle” plans continue to be all of the rage these days.

  • The debtors note that this was a “hard fought” negotiation. We’ve lost count of how many times professionals pat themselves on the backs by noting that they arrived at a deal, resolving the issues of various constituencies with conflicting interests and positions. First, enough already: this isn’t exactly Fallujah. You’re a bunch of mostly white males (the CEO of the company notwithstanding), sitting around a luxury conference table in a high rise in Manhattan or Houston. Let’s keep some perspective here, people. Second, THIS IS WHAT YOU GET PAID $1000+/hour to do. If you CAN’T get to a deal, then that really says something, particularly in a situation like this where the capital structure isn’t all-too-complex.

  • The bulk of the debtors’ assets were purchased from SandRidge Energy in 2013. This is like bankruptcy hot potato.

  • Independent directors are really becoming a cottage industry. We have to say, if you’re an independent director across dozens of companies, it probably makes sense to keep Quinn Emanuel on retainer. That way, you’re less likely to see them on the opposite side of the table (and when you do, you may at least temper certain bulldog tendencies). Just saying.

Finally, the debtors’ bankruptcy papers provide real insights into what’s happening in the oil and gas industry today — particularly in the Permian Basin. The debtors’ assets mostly rest in the Permian, the purported crown jewel of oil and gas exploration and production. Except, as previously discussed in PETITION, production of oil out of the Permian ain’t worth as much if, say, you can’t move it anywhere. Transportation constraints, while relaxing somewhat, continue to persist. Per the company:

“Prices realized by the Debtors for crude oil produced and sold in the Permian Basin have been further depressed since 2018 due to “price differentials”—the difference in price received for sales of oil in the Permian Basin as compared to sales at the Cushing, Oklahoma sales hub or sales of sour crude oil. The differentials are largely attributable to take-away capacity constraints caused by increases in supply exceeding available transportation infrastructure. During 2018, Permian Basin crude oil at times sold at discounts relative to sales at the Cushing, Oklahoma hub of $16 per barrel or more. Price differentials have narrowed as additional take-away capacity has come online, but crude oil still sells in the Permian Basin at a discount relative to Cushing prices.”

So, there’s that teeny weeny problemo.

If you think that’s bad, bear in mind what’s happening with natural gas:

“Similarly, the Henry Hub natural gas spot market price fell from a peak of $5.39 per million British thermal units (“MMBtu”) in January 2014 to $1.73 per MMBtu by March 2016, and remains at approximately $2.62 per MMBtu as of the Petition Date. In 2019, natural gas prices at the Waha hub in West Texas have at times been negative, meaning that the Debtors have at times either had to shut in production or pay purchasers to take the Debtors’ natural gas.”

It’s the natural gas equivalent of negative interest rates. 😜🙈

*All in, this fund raised $1.8b of equity. The Sheridan Group, the manager of the debtors, has raised $4.6b across three funds, completing nine major acquisitions for an aggregate purchase price of $5.7b. Only Sheridan II, however, is a debtor (as of now?).

  • Jurisdiction: S.D. of Texas (Judge Isgur)

  • Capital Structure: $66 RCF (Bank of America NA), $543.1mm Term Loan (Bank of America NA), $514mm ‘22 13.5%/17% PIK Subordinated Term Loans (Wilmington Trust NA) — see below.

  • Professionals:

    • Legal: Kirkland & Ellis LLP (Joshua Sussberg, Steven Serajeddini, Spencer Winters, Stephen Hackney, Rachael Marie Bazinski, Jaimie Fedell, Casey James McGushin) & Jackson Walker LLP (Elizabeth Freeman, Matthew Cavenaugh)

    • Board of Directors: Alan Carr, Jonathan Foster

      • Legal: Quinn Emanuel Urquhart & Sullivan LLP

    • Financial Advisor: AlixPartners LLP

    • Investment Banker: Evercore Group LLC

    • Claims Agent: Prime Clerk LLC (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Administrative agent and collateral agent under the Sheridan II Term Loan Credit Agreements: Bank of America NA

      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Stephen Piraino, Nathaniel Sokol)

      • Financial Advisor: Houlihan Lokey Capital Inc.

    • Administrative Agent under the Sheridan II RBL: Bank of America NA

      • Legal: Vinson & Elkins LLP (William Wallander, Bradley Foxman, Andrew Geppert)

      • Financial Advisor: Houlihan Lokey Capital Inc.

    • Ad Hoc Group of Subordinated Term Loans (Pantheon Ventures US LP, HarbourVest Partners LP)

      • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Gabriel Morgan, Clifford Carlson)

      • Financial Advisor: PJT Partners LP

    • Limited Partner: Wilberg Pincus LLC

      • Legal: Willkie Farr & Gallagher LLP (Brian Lennon)

Screen Shot 2019-09-18 at 9.34.47 AM.png
Source: First Day Declaration

Source: First Day Declaration

⛽️New Chapter 11 Filing - Weatherford International Plc⛽️

Weatherford International Plc

July 1, 2019

There hasn’t been a MASSIVE bankruptcy filing in a while. Windstream Holdings Inc. filed back in late February and while there’s been plenty of chapter 11 activity since, there hasn’t been anything quite as large in the last several months. There is now. Enter Weatherford International Plc.

Late on Friday, Weatherford, an Irish public limited company, filed an 8-K with the SEC with a proposed plan of reorganization and disclosure statement; it and several affiliated debtors intend to file prepackaged chapter 11 cases in the Southern District of Texas on Monday, July 1.* The timing is appropriate: nothing screams “Independence!” like a massive chapter 11 bankruptcy filing that has the effect of eliminating six billion tyrannical dollars from the balance sheet. YEE HAW. G-D BLESS AMERICA.

Here is a snapshot of Weatherford’s pre and post-bankruptcy capital structure:**

Screen Shot 2019-06-29 at 5.15.48 AM.png

And all of the action is at the pre-petition notes level of the cap stack.*** The holders of the $7.4b of pre-petition notes**** will walk away with 99% of the equity in the reorganized company (subject to various means of dilution) — a 63% recovery based on the offered valuation of the company. They will also receive up to $1.25b of new tranche b senior unsecured convertible notes and the right to participate in new tranche a senior unsecured notes. Every other class — but for existing equity (which will get wiped out) — will ride through as if this shabang ain’t even happening.

You must be wondering: how in bloody hell does a company rack up over $8b of debt? $8 BILLION!! That’s just oil and gas, darling.

Weatherford is a provider of equipment and services used in the drilling, evaluation, completion, production, and intervention of oil and natural gas wells; it operates in over 80 countries worldwide and has service and sales locations in nearly all of the oil and natural gas producing regions in the world. It operates in a highly commoditized industry and so the company dedicates millions each year to research and development in an effort to separate itself from the pack and provide value to end users that is unmatched in the market.

Which, by its own admission, it fails to do. All of that R&D notwithstanding, Weatherford nevertheless provide a commoditized product in a tough macro environment. And while all of that debt should have helped position the company to crush less-capitalized competitors, it ultimately proved to be an albatross.

To service this debt, the debtors require stability in the oil and natural gas markets at prices that catalyze E&P companies to drill, baby, drill. An oil field services company like Weatherford can only make money if there are oil operations to service. With oil and natural gas trading at low levels for years…well, you see the issue. Per the company’s 8-K:

The sustained drop in oil and gas prices has impacted companies throughout the oil and gas industry including Weatherford and the majority of its customers. As spending on exploration, development, and production of oil and natural gas has decreased so has demand for Weatherford’s services and products. The decline in spending by oil and gas companies has had a significant effect on the Debtors’ financial health. To illustrate, on a consolidated basis, the Company’s cash flows from operating activities have been negative $304 million, negative $388 million, and negative $242 million in fiscal years 2016, 2017, and 2018, respectively.

While not quite at Uber Inc. ($UBER) levels, this company is practically lighting money on fire.

Relating to the competition:

The oilfield services and equipment industry is saturated with competition from various companies that operate in the same sector and the same regions of the world as Weatherford. The primary competitive factors include safety, performance, price, quality, and breadth of products and services. Weatherford also faces competition from regional suppliers in some of the sectors in which it operates as these suppliers offer limited equipment and services that are specifically tailored to the relevant local market. Some of the Company’s competitors have better financial and technical resources, which allows them to pursue more vigorous marketing and expansion activities. This heavily competitive market has impacted the Company’s ability to maintain its market share and defend or maintain the pricing for its products and services. Heavy competition has also impacted the Company’s ability to negotiate contract terms with its customers and suppliers, which has resulted in the Company accepting suboptimal terms.

The squeeze is on, ladies and gentlemen. As E&P companies look to cut costs in the face of increased pressure from investors to lean out, they are putting companies like Weatherford through the ringer. You bet your a$$ they’re getting “suboptimal terms.”

Compounding matters, of course, is the government:

…operations are also subject to extensive federal, international, state and local laws and regulations relating to environmental production, waste management and cleanup of hazardous materials, and other matters. Compliance with the various requirements imposed by these laws and regulations has also resulted in increased capital expenditures as companies in these sectors have had to make significant investments to ensure compliance.

Well GOSH DARN. If only Weatherford had unfettered ability to pollute the hell out of the countryside and our waters all of that debt could be paid off at par plus. Those gosh darn government hacks.

All of these factors combined to strain the debtors’ liquidity “for an extended period of time.” Accordingly, the company went into cost cutting mode.***** In Q4 ‘17, it eliminated 900 jobs to the tune of $114mm in annualized savings. In 2018, the company — with the assistance of McKinsey Restructuring & Transformation Services — continued with workforce reductions, facility consolidations, and other measures.

Yet, the squeeze continued. Per the company:

Despite implementing these efficient and strategic initiatives, the Company continued to face declining revenue and cash flow, as well as market challenges. Due to the Company’s increasingly tight liquidity, its key vendors began requiring shortened payment terms, including pay on delivery or prepayment for all supplies purchased by the Company. This contributed to additional pressure on liquidity that the Company could not sustain. Additionally, as discussed above, the highly competitive market that the Company operates in posed challenges for the Company in winning new bids, resulting in decreased revenue.

Weatherford was therefore forced to divest assets. YOU KNOW YOU’RE LEVERAGED TO THE HILT WHEN YOU SELL NEARLY $1B OF ASSETS AND IT BARELY MOVES THE NEEDLE. Sale proceeds were coming in just to go back out for debt service. The company had a leverage ratio of OVER 10X EBITDA. THIS IS AN UNMITIGATED F*CKING DISASTER. What’s actually astonishing is that the company notes that it retained Lazard Freres & Co LLC ($LZ) and Latham & Watkins LLP in December ‘18 and April ‘19, respectively. Taking them at their word (and we could have sworn Latham was in there much earlier than April), WHAT THE HELL WERE THEY WAITING FOR$600mm of annual interest payments, pending maturities, untenable leverage relative to competitors, AND squeezing vendors and the company only got its sh*t together in April? They couldn’t possibly have been THAT inept. Ah, who are we kidding? We’re talking about bankruptcy here.

Now, though, the company has a deal****** and so the upshot is that it is well-positioned for a quick trip into bankruptcy. Indeed, it seeks plan confirmation no later than September 15, 2019 — a nice not-as-speedy-as-other-recent-prepacks-but-speedy prepack. To finance the cases, the company will seek approval of up to $750mm DIP revolver and a $1b DIP term loan. And it is optimistic that it will be well-positioned for the future:

Screen Shot 2019-06-29 at 10.53.10 AM.png

We’ll see.

*The company will also push through Bermuda and Irish proceedings.

**JPMorgan Chase Bank NA ($JPM) is the agent on the prepetition term loan, the prepetition revolving credit agreement, and the A&R facility.

***Only three entities out of an organizational structure of 255 or so direct and indirect subsidiaries are on the hook for the prepetition notes, thereby limiting the number of actual debtor entities that will be subsumed by these cases.

****The pre-petition notes consist of 13 — yes, THIRTEEN — different issuances of notes with interest rates ranging from 4.5% to 9.875% and maturities ranging from 2020 through 2042.

*****Well, as it relates to certain peeps, of course. The debtors’ non-debtor affiliates still had money to make a May 2019 payout to participants in the Executive Bonus Plan.

******The ad hoc noteholder committee is represented by Akin Gump Strauss Hauer & Feld LLP and Evercore Group LLC ($EVR).

  • Jurisdiction: S.D. of Texas (Judge )

  • Capital Structure:

  • Professionals:

    • Legal: Latham & Watkins LLP (George Davis, Keith Simon, David Hammerman, Annemarie Reilly, Lisa Lansio) & (local) Hunton Andrews Kurth LLP (Timothy Davidson, Ashley Harper)

    • Financial Advisor: Alvarez & Marsal LLC

    • Investment Banker: Lazard Freres & Co LLC

    • Claims Agent: Prime Clerk LLC (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Ad Hoc Prepetition Noteholder Committee

      • Legal: Akin Gump Strauss Hauer & Feld LLP (Michael Stamer, Meredith Lahaie, Kate Doorley)

      • Financial Advisor: Evercore Group LLC

    • DIP Agent: Citibank NA

      • Legal: Shearman & Sterling LLP (Frederic Sosnick, Ned Schodek, Sara Coelho, Ian Roberts)

⛽️New Chapter 11 Bankruptcy Filing - Edgemarc Energy Holdings LLC⛽️

Edgemarc Energy Holdings LLC

May 15, 2019

Pennsylvania-based Edgemarc Energy Holdings LLC and its eight affiliated debtor affiliates are the latest in a string of oil and gas related bankruptcy filings. Don’t let $73/barrel brent crude and $63/barrel West Texas Intermediate prices full you: this is one of many oil and gas filings on the near term horizon.

Edgemarc is a natural gas E&P company focused on the Appalachian Basin in Ohio and Pennsylvania; it and its affiliates control approximately 45k net acres and have drilled and developed 60 producing wells. Now, everyone knows that, right now, the Permian Basin in West Texas is the shizz and, therefore, hearing about the Appalachian Basin may put some of you on edge. But, here, there was an extraordinary externality that really helped push the company into bankruptcy, other more macro factors notwithstanding.

In September 2018, a pipeline and gathering system under construction by a third-party (ETC Northeast Pipeline LLC) exploded. This pipeline was meant to be the gathering and processing avenue for the debtors’ natural gas. Imagine spending a ton of time milking a farm full of cows only to have the production facility designed for processing and transporting the milk explode right as you were about to bring your product to market. Kinda hard to make money in that scenario, right? The same applies to drilling for natural gas: its hard to generate revenue when you can’t process, transport and sell it. And, unfortunately, repair hasn’t been easy: what was supposed to be a “within weeks” project now looks poised to push well into 2020.

According to the debtors, a subsequent dispute with ETC prevented the debtors from flowing their gas through alternative pipelines. Consequently, the debtors “had no other means of selling gas from the affected wells” and opted to “shut in” their Pennsylvania wells and pause all remaining Pennsylvania operations — a hit to 33% of the company’s production activity. Compounding matters, the debtors and ETC are now embroiled in litigation. 😬

Suffice it to say that any company that suddenly loses the ability to sell 33% of its product will struggle. Per the company:

The Debtors’ inability to sell gas from their Pennsylvania properties had a substantial negative impact on their liquidity and ability to satisfy their funded debt, contractual and other payment obligations.

Ya think?!?!? The debtors have approximately $77mm of funded debt; they also has fixed transportation services agreements pursuant to which they agreed to fixed amounts of transportation capacity with various counterparties that exposes the debtors to financial liability regardless of whether they actually transport nat gas. This is so critical, in fact, that the debtors have already filed motions seeking to reject transportation services agreements with Rover Pipeline LLC, Rockies Express Pipeline LLC, and Texas Gas Transmission LLC. Combined, those three entities constitute 3 of the top 4 creditors of the estate, to the tune of over $6mm. These obligations — along with a downward redetermination of the borrowing base under the debtors’ revolving credit facility — severely constrained the debtors’ ability to operate. The debtors have, therefore, filed for chapter 11 with the hope of finding a buyer; they do not have a stalking horse purchaser lined up (though they do have a commitment for a $107.79mm DIP from their prepetition lenders, of which $30mm is new money). The company generated consolidated net revenue of $116.9mm in fiscal 2018.

Significantly, the company is seeking to reject a “marketing service agreement” and “operational agency agreement” with BP Energy Company ($BP), pursuant to which BP agreed to purchase and receive 100% of the debtors’ nat gas capacity. We gather (see what we did there?) that it’s hard to perform under those agreements when you can’t transport your product: accordingly, BP is listed as the debtors’ largest unsecured creditor at ~$41mm. BP’s rights to setoff and/or recoupment (PETITION Note: Weil Gotshal & Manges LLP just happened to write about these two remedies this week here) will be a major facet of this case: if BP is able to exercise remedies, the debtors ability to operate post-restructuring will be threatened. Per the company:

Docket #17, Rejection Motion.

Docket #17, Rejection Motion.

The privately-held company is owned primarily by affiliates of Goldman Sachs and the Ontario Teachers’ Pension. Absent “holdup value,” we can’t imagine they’ll get any return on their investment given the circumstances.

  • Jurisdiction: D. of Delaware (Judge Shannon)

  • Capital Structure:

  • Professionals:

    • Legal: Davis Polk & Wardwell LLP (Darren Klein, Lara Samet Buchwald, Aryeh Falk, Jonah Peppiatt) & (local) Landis Rath & Cobb (Adam Landis, Kerri Mumford, Kimberly Brown, Holly Smith)

    • Directors: Patrick J. Bartels Jr., Scott Lebovitz, Sebastien Gagnon, Baird Whitehead, Zvi Orvitz, Romeo Leemrijse, Verlyn Holt, Jack Golden, George Dotson, Callum Streeter, Alan Shepard

    • Financial Advisor: Opportune LLC and Dacarba LLC

    • Investment Banker: Evercore Partners

    • Claims Agent: Prime Clerk LLC (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Prepetition & DIP Agent: Keybank NA

      • Legal: Hunton Andrews Kurth LLP (Timothy Davidson, Joseph Rovira) & (local) Connolly Gallagher LLP (Jeffrey Wisler)

    • Equityholders: Goldman Sachs & Ontario Teachers’ Pension Plan Board

      • Legal: Wachtell Lipton Rosen & Katz (Richard Mason, Emil Kleinhaus, Michael Cassel) & (local) Drinker Biddle & Reath LLP (Steven Kortanek, Patrick Jackson, Joseph Argentina Jr.)

    • ETC

      • Legal: Akerman LLP (John MItchell, David Parham, Yelena Archiyan) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, TImothy Cairns)

New Chapter 11 Bankruptcy Filing - Achaogen Inc.

Achaogen Inc.

April 15, 2019

Biopharma is where it’s at!!

San Francisco-based Achaogen Inc. ($AKAO) is the latest in a slate of biopharma debtors who have found their way into bankruptcy court — here, the District of Delaware. Achaogen is focused on “the development and commercialization of innovative antibiotic treatments against multi-drug resistant gram-negative infections.” To date, its operations have been centered around the discovery, development and commercialization of products, making it as far as clinical trials in certain instances. As if inspired by the fact that its filing came on the heels of the much-anticipated Game of Thrones (final) Season 8 premiere, the company colorfully notes its primary purpose:

Achaogen designed its lead product, ZEMDRI® (plazomicin), to fight what the Center for Disease Control (“CDC”) calls a “nightmare bacteria” and has listed as the highest category threat of “urgent.” ZEMDRI can be used to treat patients who have limited or no alternative treatment options from infections with these nightmare bacteria. Even with its current financial situation, Achaogen continues to commercialize ZEMDRI, in part because Achaogen believes that ZEMDRI can save lives for patients who may literally have no alternative.

Nightmare bacteria!! Sheesh that’s chilling.

Even more chilling is the company’s discussion of gram-negative bacteria — found “everywhere, in virtually all environments on Earth that support life.” These bacteria are becoming increasingly resistant to common antibiotics. Achaogen calls this “a global crisis…we take for granted.” The company’s core (patented) product, ZEMDRI, is designed to “retain its effectiveness in killing these more resistant bacteria.” While ZEMDRI received FDA approval for IV-treatment of patients with complicated urinary tract infections in July 2018, the FDA rejected ZEMDRI for treatment of patients with bloodstream infections, citing a lack of substantial evidence of effectiveness.

What does the company have going for it? Again, as of July 2018, it has a commercially viable product in the United States. It also has global commercialization rights. And patent protect in the US through approximately 2031 or 2032. It sells to either specialty distributors or physician-owned infusion centers. It has agreements with Hovione Limited and Pfizer for the manufacturing of its product. Finally, it has another product in development, C-Scape, which is an oral antibiotic for treatment of patients suffering from urinary tract infections caused by a particular bacteria.

So, what’s the issue? As PETITION readers have come to learn, the development and manufacture of biopharma products is a time and capital intensive process. Indeed, the company has an accumulated deficit of $559.4mm as of December 31, 2018. This bit is especially puzzling given the company’s position that the world confronts a “global crisis”:

In the past year, there has been a dramatic downturn in the availability of financing from both the debt and equity markets for companies in the anti-infective field, based in part on the withdrawal from the space by certain large pharmaceutical companies. For example, Novartis recently announced that it is shutting down its antibacterial and antiviral research, which was followed by similar moves from Eli Lilly, Bristol-Myers Squibb and AstraZeneca.3 Allergan has also recently announced its intention to divest its anti-infective business, consisting of three commercialized products. This “big pharma flight” from antiinfective research, development and commercialization has created significant challenges for early-stage biotech companies seeking to develop and commercialize novel and much needed drugs in this sector, as opportunities for partnerships, joint R&D relationships, and merger/acquisition transactions have diminished. This sector-wide trend has negatively affected not just Achaogen but many of its competitors. Achaogen, however, has been especially impacted because it has reached the point in its life cycle where it needs substantial capital infusion to drive commercialization of its recently FDA approved drug, ZEMDRI.

Look: we don’t take everything debtors say as gospel. After all, first day pleadings are an opportunity to frame the story and set the tone of a case. But if the company is right about what it’s saying and nobody appears to give two sh*ts, well, color us a wee bit concerned. Why isn’t anybody talking about this?

Anyway, in February 2018, the company entered into a loan and security agreement with Silicon Valley Bank for $50mm. The original agreement provided SVB with a security interest in virtually all of the company’s assets — including proceeds of intellectual property — but not a security interest in the IP itself. $15mm remains outstanding under the loan. In November 2018, the company retained Evercore Group LLP to run a strategic sale process but no viable purchaser emerged. It’s not worth saving the world unless you can make some dinero, we suppose.

After engaging in various liquidity maximization efforts (including job cuts), fundraising initiatives (including an insufficient equity raise), and licensing discussions with entities abroad, the company ultimately decided that nothing would generate enough liquidity for the company to avoid chapter 11. The company notes, “although Achaogen’s out-of-court sale process did not yield any acceptable bids, many parties had expressed interest in bidding at any potential 363 auction sale, where it could pursue the Assets free and clear of existing liabilities.” The company, therefore, filed for chapter 11 to pursue a new sale process; it has no stalking horse bidder teed up. To market its assets, the company has replaced Evercore with Cassel Salpeter & Co. LLC.

In support of the bankruptcy case, SVB committed to provide the company with a $25mm DIP credit facility of which $10mm is new money and $15mm is a roll-up of the aforementioned pre-petition debt. In exchange, SVB now gets a security interest in the company’s IP.

The company’s unsecured debt is comprised of lease obligations, minimum purchase requirements under its manufacturing contract, a success fee tied to the company’s FDA approval, and $18.7mm of trade debt. New Enterprise Associates Inc., a reputed Silicon Valley venture capital firm, is the company’s largest equity holder with approximately 10.76% of the company’s shares. Prior to its 2014 IPO, the company had raised $152.1mm starting with its Series A round in August 2004: it IPO’d at a valuation of $200.4mm, having issued 6.9mm shares at $12/share to the public. It’s equity is likely worth f*ck all. Well, not exactly: we suppose this isn’t ENTIRELY “f*ck all”:

Screen Shot 2019-04-15 at 2.48.04 PM.png

But it’s pretty darn close. Now the issue is what price the IP will fetch in a bankruptcy sale process. It will have to be tens of millions of dollars for NEA to have any sort of recovery.

  • Jurisdiction: D. of Delaware (Judge Shannon)

  • Capital Structure: $15mm secured debt (Silicon Valley Bank)

  • Professionals:

    • Legal: Hogan Lovells US LLP (Erin Brady, Richard Wynne, Christopher Bryant, John Beck) & (local) Morris Nichols Arsht & Tunnell LLP (Derek Abbott, Andrew Remming, Matthew Talmo, Paige Topper)

    • Financial Advisor: Meru LLC

    • Investment Banker: Cassel Salpeter & Co., LLC

    • Claims Agent: KCC (*click on the link above for free docket access)

  • Other Professionals:

    • Prepetition & DIP Lender ($25mm): Silicon Valley Bank

      • Legal: Morrison & Foerster LLP ( Alexander Rheaume, Todd Goren, Benjamin Butterfield, David Ephraim) & (local) Ashby & Geddes PA (Gregory Taylor, Stacy Newman)

    • Official Committee of Unsecured Creditors (Hovione Limited, EsteveQuimica SA, Solar Capital Ltd.,. Crystal BioScience, World Courier)

⛽️New Chapter 11 Bankruptcy Filing - Jones Energy Inc.⛽️

Jones Energy Inc.

April 14, 2019

Austin-based independent oil and natural gas E&P company, Jones Energy Inc., filed a prepackaged chapter 11 bankruptcy to restructure its $1.009b of debt ($450mm senior secured first lien notes and $559mm unsecured notes across two tranches). In case you didn’t realize, oil and gas exploration and production is a capital intensive business.

The company operates primarily in the Anadarko Basin in Oklahoma and Texas. Its territory is the aggregation of acreage accumulated over the years, including the 2009 purchase of Crusader Energy Group Inc. out of bankruptcy for $240.5mm in cash.

We’re not going to belabor the point as to why this company is in bankruptcy: the narrative is no different than most other oil and gas companies that have found their way into bankruptcy court over the last several years. Indeed, this chart about sums things up nicely:

Screen Shot 2019-04-05 at 2.29.01 PM.png

It’s really just a miracle that it didn’t file sooner. Why hadn’t it? Per the company:

…the Debtors consummated a series of liquidity enhancing transactions, including equity raises, debt repurchases, strategic acquisitions, non-core asset sales, and modifications of their operations to reduce their workforce and drilling activities. This included a Company-wide headcount reduction in 2016 resulting in the termination of approximately 30% of the Debtors’ total workforce, as well as halting drilling activity spanning several months during the worst of the historic commodity downturn.

But…well…the debt. As in, there’s too much of it.

Screen Shot 2019-04-05 at 2.56.24 PM.png

And debt service costs were too damn high. In turn, the company’s securities traded too damn low:

Source: Disclosure Statement

Source: Disclosure Statement

What’s more interesting here is the process that unfolded. In February 2018, the company issued $450mm of 9.25% ‘23 senior secured first lien notes. The proceeds were used to repay the company’s senior secured reserve-based facility and eliminate the restrictive covenants contained therein. The company also hoped to use the proceeds to repurchase some of its senior unsecured notes at a meaningful discount to par. In a rare — yet increasingly common — show of unity, however, the company’s unsecured lenders thwarted these efforts by binding together pursuant to a “cooperation agreement” and telling the company to take its pathetic offer and pound sand. (PETITION Note: its amazing what lenders can achieve if they can solve for a collective action problem). This initiated a process that ultimately led to the transaction commemorated in the company’s announces restructuring support agreement.

So what now? The senior secured lenders will equitize their debt and come out with 96% of the common stock in the reorganized entity. Holders of unsecured debt will get 4% equity and warrants (exercisable for up to a 15% ownership stake in the reorganized company), both subject to dilution by equity issued to management under a “Management Incentive Plan.” The company has a commitment for $20mm of exit financing lined up (with the option for replacement financing of up to $150mm).

Hopefully the company will have better luck without the albatross of so much debt hanging over it.

  • Jurisdiction: S.D. of Texas (Judge TBD)

  • Capital Structure: $450mm 9.25% ‘23 senior secured first lien notes (UMB Bank NA), $559mm 6.75% ‘22 and 9.25% ‘23 unsecured notes (Wells Fargo Bank NA)

  • Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, Christopher Marcus, Brian Schartz, Anthony Grossi, Ana Rotman, Rebecca Blake Chaikin, Mark McKane, Brett Newman, Kevin Chang) & (local) Jackson Walker LLP (Matthew Cavenaugh, Jennifer Wertz)

    • Independent Directors: Tara Lewis, L. Spencer Wells

    • Financial Advisor: Alvarez & Marsal LLC (Ryan Omohundro)

    • Investment Banker: Evercore Group LLC (Daniel Aronson)

    • Claims Agent: Epiq (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Ad Hoc Group of First Lien Noteholders

      • Legal: Milbank LLP (Dennis Dunne, Evan Fleck, Michael Price) & (local) Porter Hedges LLP (John Higgins, Eric English, Genevieve Graham)

      • Financial Advisor: Lazard Freres & Co. LLC

    • Ad Hoc Group of Crossover Holders

      • Legal: Davis Polk & Wardwell LLP (Brian Resnick, Benjamin Schak) & (local) Haynes and Boone LLP (Charlie Beckham, Kelli Norfleet)

      • Financial Advisor: Houlihan Lokey Capital Inc.

    • Metalmark Capital LLC

      • Legal: Vinson & Elkins LLP (Andrew Geppert, David Meyer, Jessica Peet, Michael Garza)

Updated 4/15/19 2:05 CT

New Chapter 11 Filing - Hexion Holdings LLC

Hexion Holdings LLC

April 1, 2019

What we appreciate that and, we hope thanks to PETITION, others will eventually come to appreciate, is that there is a lot to learn from the special corporate law, investment banking, advisory, and investing niche labeled “restructuring” and “distressed investing.” Here, Ohio-based Hexion Holdings LLC is a company that probably touches our lives in ways that most people have no knowledge of: it produces resins that “are key ingredients in a wide variety of industrial and consumer goods, where they are often employed as adhesives, as coatings and sealants, and as intermediates for other chemical applications.” These adhesives are used in wind turbines and particle board; their coatings prevent corrosion on bridges and buildings. You can imagine a scenario where, if Washington D.C. can ever get its act together and get an infrastructure bill done, Hexion will have a significant influx of revenue.

Not that revenue is an issue now. It generated $3.8b in 2018, churning out $440mm of EBITDA. And operational performance is on the upswing, having improved 21% YOY. So what’s the problem? In short, the balance sheet is a hot mess.* Per the company:

“…the Debtors face financial difficulties. Prior to the anticipated restructuring, the Debtors are over nine times levered relative to their 2018 adjusted EBITDA and face annual debt service in excess of $300 million. In addition, over $2 billion of the Debtors’ prepetition funded debt obligations mature in 2020. The resulting liquidity and refinancing pressures have created an unsustainable drag on the Debtors and, by extension, their Non-Debtor Affiliates, requiring a comprehensive solution.”

This is what that capital structure looks like:

Screen Shot 2019-04-01 at 12.28.48 PM.png
Screen Shot 2019-04-01 at 12.29.02 PM.png

(PETITION Note: if you’re wondering what the eff is a 1.5 lien note, well, welcome to the party pal. These notes are a construct of a frothy high-yield market and constructive readings of credit docs. They were issued in 2017 to discharge maturing notes. The holders thereof enjoy higher priority on collateral than the second lien notes and other junior creditors below, but slot in beneath the first lien notes).

Anyway, to remedy this issue, the company has entered into a support agreement “that enjoys the support of creditors holding a majority of the debt to be restructured, including majorities within every tier of the capital structure.” The agreement would reduce total funded debt by $2b by: (a) giving the first lien noteholders $1.45b in cash (less adequate protection payments reflecting interest on their loans), and 72.5% of new common stock and rights to participate in the rights offering at a significant discount to a total enterprise value of $3.1b; and (b) the 1.5 lien noteholders, the second lien noteholders and the unsecured noteholders 27.5% of the new common stock and rights to participate in the rights offering. The case will be funded by a $700mm DIP credit facility.

*Interestingly, Hexion is a derivative victim of the oil and gas downturn. In 2014, the company was selling resin coated sand to oil and gas businesses to the tune of 8% of sales and 28% of segment EBITDA. By 2016, segment EBITDA dropped by approximately $150mm, a sizable loss that couldn’t be offset by other business units.

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure: See above.

  • Professionals:

    • Legal: Latham & Watkins LLP (George Davis, Andrew Parlan, Hugh Murtagh, Caroline Reckler, Jason Gott, Lisa Lansio, Blake Denton, Andrew Sorkin, Christopher Harris) & (local) Richards Layton & Finger PA (Mark Collins, Michael Merchant, Amanda Steele, Brendan Schlauch)

    • Managers: Samuel Feinstein, William Joyce, Robert Kaslow-Ramos, George F. Knight III, Geoffrey Manna, Craig Rogerson, Marvin Schlanger, Lee Stewart

    • Financial Advisor: AlixPartners LLP

    • Investment Banker: Moelis & Company LLC (Zul Jamal)

    • Claims Agent: Omni Management Group (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Ad Hoc Group of First Lien Noteholders (Angelo Gordon & Co. LP, Aristeia Capital LLC, Barclays Bank PLC, Beach Point Capital Management LP, Capital Research and Management Company, Citadel Advisors LLC, Contrarian Capital Management LLC, Credit Suisse Securities USA LLC, Davidson Kempner Capital Management LP, DoubleLine Capital LP, Eaton Vance Management, Federated Investment Counseling, GoldenTree Asset Management LP, Graham Capital Management LP, GSO Capital Partners LP, Heyman Enterprise LLC, Hotchkis and Wiley Capital Management LLC, OSK VII LLC, Pacific Investment Management Company LLC, Silver Rock Financial LP, Sound Point Capital Management LP, Tor Asia Credit Master Fund LP, UBS Securities LLC, Whitebox Advisors LLC)

      • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Daniel Fisher, Naomi Moss, Abid Qureshi)

      • Financial Advisor: Evercore Group LLC

    • Ad Hoc Group of Crossover Noteholders (Aegon USA Investment Management LLC, Aurelius Capital Master Ltd., Avenue Capital Management II LP, Avenue Europe International Management, Benefit Street Partners LLC, Cyrus Capital Partners LP, KLS Diversified Asset Management LLC, Loomis Sayles & Company LP, Monarch Alternative Capital LP, New Generation Advisors LLC, P. Schoenfeld Asset Management LP)

      • Legal: Milbank LLP (Samuel Khalil, Matthew Brod)

      • Financial Advisor: Houlihan Lokey Capital Inc.

    • Ad Hoc Group of 1.5 Lien Noteholders

      • Legal: Jones Day (Sidney Levinson, Jeremy Evans)

    • Pre-petition RCF Agent & Post-petition DIP Agent ($350mm): JPMorgan Chase Bank NA

      • Legal: Simpson Thacher & Bartlett LLP

    • Trustee under the First Lien Notes: U.S. Bank NA

      • Legal: Kelley Drye & Warren LLP (James Carr, Kristin Elliott) & (local) Dorsey & Whitney LLP (Eric Lopez Schnabel, Alessandra Glorioso)

    • Trustee of 1.5 Lien Notes: Wilmington Savings Fund Society FSB

      • Legal: Arnold & Porter Kaye Scholer LLP

    • Trustee of Borden Indentures: The Bank of New York Mellon

    • Sponsor: Apollo

    • Official Committee of Unsecured Creditors: Pension Benefit Guaranty Corporation; Agrium US, Inc.; The Bank of New York Mellon; Mitsubishi Gas Chemical America; PVS Chloralkali, Inc.; Southern Chemical Corporation; Wilmington Trust; Wilmington Savings Fund Society; and Blue Cube Operations LLC

      • Legal: Kramer Levin Naftalis & Frankel LLP (Kenneth Eckstein, Douglas Mannal, Rachael Ringer) & (local) Bayard PA (Scott Cousins, Erin Fay, Gregory Flasser)

      • Financial Advisor: FTI Consulting Inc. (Samuel Star)

Updated:

⛽️New Chapter 11 Filing - Southcross Energy Partners LP⛽️

Southcross Energy Partners LP

April 1, 2019

We’ve been noting — in “⛽️Is Oil & Gas Distress Back?⛽️“ (March 6) and “Oil and Gas Continues to Crack (Long Houston-Based Hotels)“ (March 24) that oil and gas was about to rear its ugly head right back into bankruptcy court. Almost on cue, Vanguard Natural Resources Inc. filed for bankruptcy in Texas on the last day of Q1 and, here, Southcross Energy Partners LP kicked off Q2.

Dallas-based Southcross Energy Partners LP is a publicly-traded company ($SXEE) that provides midstream services to nat gas producers/customers, including nat gas gathering, processing, treatment and compression and access to natural gas liquid (“NGL”) fractionation and transportation services; it also purchases and sells nat gas and NGL; its primary assets and operations are located in the Eagle Ford shale region of South Texas, though it also operates in Mississippi (sourcing power plants via its pipelines) and Alabama. It and its debtor affiliates generated $154.8mm in revenues in the three months ended 09/30/18, an 11% YOY decrease.

Why are the debtors in bankruptcy? Because natural gas prices collapsed in 2015 and have yet to really meaningfully recover — though they are up from the $1.49 low of March 4, 2016. As we write this, nat gas prices at $2.70. These prices, combined with too much leverage (particularly in comparison to competitors that flushed their debt through bankruptcy) and facility shutdowns, created strong headwinds the company simply couldn’t surmount. It now seeks to use the bankruptcy process to gain access to much needed capital and sell to a buyer to maximize value. The company does not appear to have a stalking horse bidder lined up.

The debtors have a commitment for $137.5mm of new-money post-petition financing to fund its cases. Use of proceeds? With the agreement of its secured parties, the debtors seek to pay all trade creditors in the ordinary course of business. If approved by the court, this would mean that the debtors will likely avoid having to contend with an official committee of unsecured creditors and that only the secured creditors and holders of unsecured sponsor notes would have lingering pre-petition claims — a strong power move by the debtors.

  • Jurisdiction: D. of Delaware (Judge Walrath)

  • Capital Structure: $81.1mm funded ‘19 RCF (Wells Fargo Bank NA), $430.875mm ‘21 TL (Wilmington Trust NA), $17.4mm unsecured sponsor notes (Wells Fargo NA)

  • Professionals:

    • Legal: Davis Polk & Wardwell LLP (Marshall Heubner, Darren Klein, Steven Szanzer, Benjamin Schak) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Andrew Remming, Joseph Barsalona II, Eric Moats)

    • Financial Advisor: Alvarez & Marsal LLC

    • Investment Banker: Evercore Group LLC

    • Claims Agent: KCC (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Prepetition RCF & Unsecured Agent: Wells Fargo Bank NA

      • Legal: Vinson & Elkins LLP (William Wallander, Brad Foxman, Matt Pyeatt) & (local) Womble Bond Dickinson US LLP (Ericka Johnson)

    • Prepetition TL & DIP Agent ($255mm): Wilmington Trust NA

      • Legal: Arnold & Porter Kaye Scholer LLP (Seth Kleinman, Alan Glantz)

    • Post-Petition Lenders and Ad Hoc Group

      • Legal: Willkie Farr & Gallagher LLP (Joseph Minias, Paul Shalhoub, Leonard Klingbaum, Debra McElligott) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Matthew Lunn)

    • Southcross Holdings LP

      • Legal: Debevoise & Plimpton LLP (Natasha Labovitz)

    • Stalking Horse Bidder:

Updated 9:39 CT

New Chapter 11 Bankruptcy Filing - Windstream Holdings Inc.

Windstream Holdings Inc.

February 25, 2019

See here for our write-up on Winstream Holdings Inc.

  • Jurisdiction: S.D. of New York (Judge Drain)

  • Capital Structure: see below.

  • Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, Stephen Hessler, Ross Kwasteniet, Marc Kieselstein, Brad Weiland, Cristine Pirro Schwarzman, John Luze, Neda Davanipour)

    • Legal (Board of Directors): Norton Rose Fulbright US LLP (Louis Strubeck Jr., James Copeland, Kristian Gluck)

    • Financial Advisor: Alvarez & Marsal LLC

    • Investment Banker: PJT Partners LP

    • Claims Agent: KCC (*click on the link above for free docket access)

  • Other Parties in Interest:

    • DIP Lender ($500mm TL, $500mm RCF): Citigroup Global Markets Inc.

    • Prepetition 10.5% and 9% Notes Indenture Trustee: Wilmington Trust NA

      • Legal: Reed Smith LLP (Jason Angelo)

    • Prepetition TL and RCF Agent: JPMorgan Chase Bank NA

      • Legal: Simpson Thacher & Bartlett LLP (Sandeep Qusba, Nicholas Baker, Jamie Fell)

    • Ad Hoc Group of Second Lien Noteholders

      • Legal: Milbank LLP

      • Financial Advisor: Houlihan Lokey Capital

    • Ad Hoc Group of First Lien Term Lenders

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Andrew Rosenberg, Samuel Lovett, Michael Rudnick)

      • Financial Advisor: Evercore

    • Midwest Noteholders

      • Legal: Shearman & Sterling LLP

    • Uniti Group Inc.

      • Legal: Davis Polk & Wardwell LLP (Marshall Huebner, Eli Vonnegut, James Millerman)

      • Financial Advisor: Rothschild & Co.

    • Large Unsecured Creditor: AT&T Corp.

      • Legal: Arnold & Porter Kaye Scholer LLP (Brian Lohan, Ginger Clements, Peta Gordon) & AT&T (James Grudus)

    • Large Unsecured Creditor: Verizon Communications Inc.

      • Legal: Stinson Leonard Street LLP (Darrell Clark, Tracey Ohm)

    • Official Committee of Unsecured Creditors (AT&T Services Inc., Pension Benefit Guaranty Corporation, Communication Workers of America, AFL-CIO CLC, VeloCloud Networks Inc., Crown Castle Fiber, LEC Services Inc., UMB Bank)

      • Legal: Morrison & Foerster LLP (Lorenzo Marinuzzi, Brett Miller, Todd Goren, Jennifer Marines, Erica Richards)

Screen Shot 2019-02-25 at 9.04.55 PM.png

New Chapter 22 Filing - New MACH Gen LLC

New MACH Gen LLC

6/11/18

In ⓶⓶Is A Fresh Batch of Chapter 22s Coming?⓶⓶, we asked "Did Talen Energy's Acquisition of MACH Gen Miss the Mark? (Short Synergy)". Apparently the answer is yes to both questions: MACH Gen is now in bankruptcy court for the second time in four years. 

New MACH Gen LLC and four affiliated debtors have filed a prepackaged chapter 11 bankruptcy that seeks to partially equitize its first lien debt, transfer interests in the Harquahala facility in Arizona to the First Lien Lenders, eliminate approximately $95 million of debt off of the company's balance sheet, shed approximately $20 million of annual interest expense, and reorganize around two of the debtor entities. If the plan is effectuated, the company will emerge from bankruptcy with a (slightly) trimmed down balance sheet including (i) $512 million of first lien debt split among a revolving credit facility and two term loans and provided by the prepetition First Lien Lenders and (ii) approximately $25 million in a new second lien term loan provided by Talen Energy Supply LLC. The First Lien Lenders have also agreed to provide a $20 million DIP credit facility. The proposed plan of reorganization appears to be fully consensual among the various debt and equity interest holders. Accordingly, the company hopes to confirm the plan within 45 days of filing and obtain regulatory approvals another within an additional 45 days. 

The company is the owner and manager of a portfolio of three natural gas-fired electric generating facilities: (1) a 1,080 MW facility located in Athens, New York that achieved commercial operation on May 5, 2004 (the “Athens Facility”); (2) a 1,092 MW facility located in Maricopa County, Arizona, that achieved commercial operation on September 11, 2004 (the “Harquahala Facility”); and (3) a 360 MW facility, located in Charlton, Massachusetts, that achieved commercial operation on April 12, 2001 (the “Millennium Facility,” and collectively with the Athens Facility and the Harquahala Facility, the “Facilities”). The company generates revenue by selling energy, capacity and ancillary services from the Facilities into relevant power markets. In the last fiscal year, the company generated approximately $269 million of operating revenue at a net loss of approximately $10 million. 

These numbers shouldn't really be surprising. In May we highlighted the following:

"Here is where natural gas prices were (i) in April 2014 around the time of the bankruptcy filing (5.97), (ii) in November 2015 (2.08) at the time of the Talen acquisition, (iii) in June 2016 (2.57) at the time of the announced Riverstone transaction, (iv) in December 2016 at the time the transaction closed (3.58) and (v) where they stand now (~2.69):"
Screen Shot 2018-06-11 at 9.41.11 AM.png

This change in the natural gas market (and regulatory hurdles) flipped "compelling future projections" to "a challenging operating environment" and, in 2016, the company "significantly underperformed" its way to a net loss of $589.8 million. Given the current environment for natural gas, we'll see whether this transaction does the trick. After all, as the company notes, "[a]though the Plan will result in the elimination of debt, Reorganized MACH Gen will continue to have a significant amount of indebtedness after the Effective Date." See you in four years? 

  • Jurisdiction: D. of Delaware
  • Capital Structure: $132.9mm first lien RCF (CLMG Corp., Beal Bank SSB), $465.1mm first lien TL,      
  • Company Professionals:
    • Legal: Young Conaway Stargatt & Taylor LLP (Robert Brady, Edmon Morton, Kenneth Enos, Elizabeth Justison)
    • Financial Advisor: Alvarez & Marsal LLC (Ryan Omohundro)
    • Investment Banker: Evercore LLC (Bo Yi)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
  • First Lien & DIP Agent: CLMG Corp.
  • First Lien Lenders: Beal Bank USA/SSB
    • Legal: White & Case LLP (Thomas Lauria, Scott Greissman, Elizabeth Feld)
  • Talen Energy Supply LLC 
    • Legal: Skadden Arps Slate Meagher & Flom LLP (Lisa Laukitis) 

New Chapter 11 Filing - Enduro Natural Resources LLC

Enduro Natural Resources LLC

5/15/18

Enduro Natural Resources LLC, an oil and natural gas producer with properties in North Dakota, Wyoming, Texas, Louisiana and New Mexico, has filed for bankruptcy to effectuate a three-package asset sale to three separate stalking horse bidders.  The company notes in an endearingly self-aware way, 

"Like many other upstream energy companies, the Debtors did not anticipate in the early part of this decade that they would eventually succumb to the demands of repaying the capital they borrowed to invest in their exploration and production activities. But the prices of crude oil and natural gas declined dramatically beginning mid-year 2014, as a result of robust nonOrganization of the Petroleum Exporting Countries' ("OPEC") supply growth led by unconventional production in the United States, weakening demand in emerging markets, and OPEC's decision to continue to produce at high levels." 

While the company took a variety of measures to combat the effects of these externalities -- including operational fixes and a prior out-of-court restructuring transaction -- its leverage remained too high in relation to asset value. Indeed, in the aggregate, the combined offers for the three packages of assets equates to $77.5 million which doesn't even clear the first lien debt. 

Finally, the beauty of a huge wave of same-industry chapter 11 filings is that you start seeing the same players over and over again. Among its top creditors are some other oil and gas companies with plenty of experience in bankruptcy court, i.e., Exco Operating Company and Basic Energy Services and, soon, Pioneer Natural Resources. The good times continue to roll in the upstream exploration and production space. 

  • Jurisdiction: D. of Delaware
  • Capital Structure: $208.7mm first lien RCF (Bank of America NA), $141mm second lien debt (Wilmington Trust NA)   
  • Company Professionals:
    • Legal: Latham & Watkins LLP (George Davis, Caroline Reckler, Matthew Warren, Jason Gott, Lindsay Henrikson) & (local) Young Conaway Stargatt & Taylor LLP (Michael Nestor, Kara Hammond Coyle)
    • Financial Advisor: Alvarez & Marsal North America LLC
    • Investment Banker: Evercore LLC
    • Claims Agent: KCC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Sponsor & Major Second Lien Lender: Riverstone Holdings LLC
    • First Lien Agent: Bank of American NA
      • Legal: Davis Polk & Wardwell LLP (Damian S. Schaible, Aryeh Ethan Falk) & (local) Morris, Nichols, Arsht, & Tunnell LLP
      • Financial Advisor: RPA Advisors

New Chapter 11 Filing - Southeastern Grocers LLC

Southeastern Grocers LLC

3/27/18

Southeastern Grocers LLC, the Jacksonville Florida-based parent company of grocery chains Bi-Lo, Winn-Dixie and others, has filed a prepackaged bankruptcy in the District of Delaware - mere weeks after Tops Holding II Corporation, another grocer, filed for bankruptcy in the Southern District of New York. The company notes that, as part of the chapter 11 filing, it intends to "close 94 underperforming stores," "emerge from this process likely within the next 90 days," and "continue to thrive with 582 successful stores in operation." Unlike Tops, it helps when you don't have any collective bargaining agreements.

More to come...

  • Jurisdiction: D. of Delaware
  • Capital Structure: $385mm ABL (Deutsche Bank AG New York Branch), $425mm 9.25% '19 secured notes (Wilmington Savings Fund Society, FSB), $522mm 8.625%/9.375% '18 Senior PIK Toggle Notes unsecured notes (Wells Fargo Bank, NA)     
  • Company Professionals:
    • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Matthew Barr, Sunny Singh) & (local) Richards Layton & Finger PA (Daniel J. DeFranceschi, Paul N. Heath, Amanda R. Steele) 
    • Financial Advisor: FTI Consulting Inc.
    • Investment Banker: Evercore Group LLC (Stephen Goldstein)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
    • Independent Director: Neal Goldman
  • Other Parties in Interest:
    • Ad Hoc Group of Unsecured Noteholders & 9.25% '19 Senior Secured Noteholders
      • Legal: Morrison & Foerster LLP (Dennis Jenkins, Brett Miller) & (local) Drinker Biddle & Reath LLP (Steven Kortanek)
      • Financial Advisor: Moelis & Company LLC
    • Private Equity Sponsor: Lone Star Funds
      • Legal: King & Spalding LLP (W. Austin Jowers, Paul Ferdinands)
Source: First Day Declaration

Source: First Day Declaration

New Chapter 11 Filing - Tops Holding II Corporation

Tops Holding II Corporation

  • 2/21/18 Recap: When a company's "Overview" in its First Day Declaration basically leads with union metrics (12,300 unionized employees of 14,000 total employees) and collective bargaining agreement numbers (12 of them), you know there's gonna be a war with employees. The fact that the footprint is 169 stores-wide in three states almost seems like a footnote. As does the fact that the business started in the 1920s and seemingly thrived through 2007 when, naturally, private equity got involved and went on a debt-ridden acquisition spree. But hang on: we're getting ahead of our skis here. So, what happened here? Well, clearly, the company has to negotiate with its unions; it also seeks to deleverage its ballooning balance sheet and take care of some leases and supply agreements. The company has secured $265mm in DIP financing to fund the cases; it says that it "intend[s] to remain in chapter 11 for approximately six (6) months." We'll believe it when we see it. Anyway, WHY does it need to take all of these steps? Well, as we stated before: private equity, of course. "Despite the significant headwinds facing the grocery industry, over the past five years, the Company has experienced solid financial performance and has sustained stable market share. The vast majority of the Company’s supermarkets generate positive EBITDA and the Company generates strong operating cash flows. Transactions undertaken by previous private equity ownership, however, saddled the Company with an unsustainable amount of debt on its balance sheet. Specifically, the Company currently has approximately $715 million of prepetition funded indebtedness...." Ah, private equity = a better villain than even Amazon (though Amazon gets saddled with blame here too, for the record). But wait: don't forget about the pensions! "[T]he Company has been embroiled in a protracted and costly arbitration with the Teamsters Pension Fund concerning a withdrawal liability of in excess of $180 million allegedly arising from the Company’s acquisition of Debtor Erie Logistics LLC" from its biggest food supplier, C&S Wholesale Grocers Inc., the 10th largest private company in the US. Moreover, the company has been making monthly pension payments; nevertheless, the pension is underfunded by approximately $393mm. The company continues, "Utilizing the tools available to it under the Bankruptcy Code, the Company will endeavor to resolve all issues relating to the Teamsters Arbitration and address its pension obligations, and the Company will take reasonable steps to do so on a consensual basis." Oy. What a hot mess. We can't even read that without ominous music seemingly popping up out of nowhere. More to come.

  • Jurisdiction: S.D. of New York

  • Capital Structure: $112mm RCF (inclusive of a $10mm FILO and $34mm LCs, Bank of America NA), $560mm 8% '22 senior secured notes, $67.5mm 9% '21 opco unsecured notes, $8.6mm 8.75%/9.5% '18 holdco unsecured notes

  • Company Professionals:

    • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Stephen Karotkin, Sunny Singh)

    • Financial Advisor/CRO: FTI Consulting Inc. (Michael Buenzow, Armen Emrikian, Paul Griffith, Ronnie Bedway, Andy Kopfensteiner)

    • Investment Banker: Evercore (David Ying, Stephen Goldstein, Jeremy Matican, Elliot Ross, Jonathan Kartus, Andrew Kilbourne)

    • Real Estate Advisor: Hilco Real Estate LLC

    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Prepetition ABL Agent & DIP ABL Agent: Bank of America NA

      • Legal Counsel: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Amelia Joiner, Matthew Ziegler)

    • Indenture Trustee for Senior Notes due 2018, notes due 2021 and Senior Secured Notes: U.S. Bank NA

      • Legal: Thompson Hine LLP (Irving Apar, Elizabeth Frayer, Derek Wright)

    • Ad Hoc Noteholder Group & DIP TL Lenders (Column Park Asset Management LP, Fidelity Management & Research Company, HG Vora Capital Management LLC, Signature Global Asset Management, Silver Point Capital LP)

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Alan Kornberg, Diane Meyers, Lauren Shumejda)

      • Financial Advisor: Lazard Freres & Co. LLC

    • DIP TL Agent: Cortland Capital Markets Services LLC

      • Legal: Arnold & Porter Kaye Scholer LLP (Tyler Nurnberg, Alan Glantz)

    • Southpaw Asset Management LP

      • Legal: Cooley LLP (Jeffrey Cohen, Steven Siesser, Sheila Sadighi, Andrew Behlmann)

    • Official Committee of Unsecured Creditors (PepsiCo, Inc., Valassis Direct Mail, Inc., Osterweis Strategic Income Fund, U.S. Bank N.A., the UFCW Local One Pension Fund, the Teamsters Local 264, and Benderson Development Company, LLC)

      • Legal: Morrison & Foerster LLP (Brett Miller, Dennis Jenkins, Jonathan Levine, Erica Richards)

      • Financial Advisor: Zolfo Cooper LLC

New Chapter 11 Filing - Fieldwood Energy LLC

Fieldwood Energy LLC

  • 2/15/18 Recap: Riverstone Holdings (12% owned by Goldman Sachs) attempted to keep Fieldwood Energy LLC out of bankruptcy back in the beginning of the oil & gas collapse but, alas, it appears the capital structure was too hefty to manage in a continued depressed oil and gas market. Today, the company filed a prepackaged plan of reorganization to slice its debt virtually in half (from $3.26b to $1.6b), implement a $525mm rights offering (use of proceeds = purchase Noble Energy's Gulf of Mexico assets), and secure a $60mm DIP credit facility. Existing RBL lenders will be paid in cash in full; first lien lenders will receive a $1.14b FILO TL and cash; holders of the prepetition FILO facility will receive a share of $518mm second lien term loan and cash; and the second lien lenders and Riverstone will receive 20.25% of the new equity plus rights to purchase the remainder via the rights offering. Translation: Riverstone will still own a significant percentage of this company. More to come...
  • Jurisdiction: S.D. of Texas (Judge Jones)
  • Capital Structure: $3.26b debt     
  • Company Professionals:
    • Legal: Weil Gotshal & Manges LLP (Stephen Karotkin, Ray Schrock, Matthew Barr, Alfredo Perez, Jessica Liou, Daniel Gwen, Patrick Steel)
    • Financial Advisor: Opportune LLP
    • Investment Banker: Evercore Group LLC (David Ying)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Prepetition Reserves-Based Lending Facility Agent: Citibank NA
      • Legal: Willkie Farr & Gallagher LLP (Jennifer Hardy, Ana Alfonso, Debra McElligott)
    • Ad Hoc Group of First Lien Term Loan Lenders
      • Legal: O'Melveny & Myers LLP (George Davis, David Johnson, Evie Whiting and Daniel Shamah) & (local) Jackson Walker LLP (Patricia Tomasco, Matthew Cavenaugh, Kristhy Peguero, Jennifer Wertz)
    • Prepetition Agent of the Second Lien Term Loan Facility: Cortland Capital Market Services LLC
      • Legal: Davis Polk & Wardwell LLP (Damian S. Schaible, Darren S. Klein, Natasha Tsiouris) & (local) Haynes and Boone LLP (Henry Flores, Kenric Kattner, Kourtney Lyda)
    • Noble Energy, Inc.
      • Legal: Bracewell LLP (William A. Wood III) 
    • Apache Corporation
      • Legal: Andrews Kurth Kenyon LLP (Robin Russell)
    • PE Sponsor
      • Riverstone V FW Holdings Sub LLC
        • Legal: Vinson & Elkins LLP (David Meyer, Jessica Peet)

Updated 4/2/18 (case confirmed)

New Chapter 11 Bankruptcy - Orchard Acquisition Company LLC (The J.G. Wentworth Company)

The J.G. Wentworth Company

  • 12/12/17 Recap: What's the statute of limitations for getting tagged with the "Chapter 22" label? While this may be out of bounds thanks to the passage of time, this is not the company's first foray in bankruptcy court, having previously filed during the financial crisis in 2009. It subsequently emerged under new private equity ownership and then IPO'd in 2013. This time around, the specialty-finance company in the business of providing financing solutions ((e.g., mortgage lending (as an approved issuer with Ginnie Mae, Freddie Mac, and Fannie Mae), structured settlement, annuity and lottery payment purchasing, prepaid cards, and personal loans)) filed a prepackaged bankruptcy pursuant to which its lenders will be swapping debt for at least 95.5% of the new equity and some cash. Holders of partnership interests and tax-related claims will get the remaining equity (subject to dilution by the 8% of equity set aside for management allocations). The company will eliminate its $449.5mm of debt and have a $65-70mm revolving credit facility to utilize going forward. The company blames regulatory requirements and a highly competitive market that pressured rates, service levels, products, and fees for its downfall. 
  • Jurisdiction: D. of Delaware (Judge Gross)
  • Capital Structure: $449.5mm '19 first lien TL (Jefferies Finance LLC)     
  • Company Professionals:
    • Legal: Simpson Thatcher & Bartlett LLP (Elisha Graff, Kathrine McLendon, Edward Linden, Randi Lynn Veenstra, Haley Garrett, Nicholas Baker, Bryce Friedman) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Sean Beach)
    • FInancial Advisor: Ankura Consulting
    • Investment Banker: Evercore 
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Jefferies Finance LLC
      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Natasha Tsiouris, Erik Jerrard) & (local) Potter Anderson & Corroon LLP (Jeremy Ryan, R. Stephen McNeill, D. Ryan Slaugh)
      • Financial Advisor: FTI Consulting Inc. (formerly CDG Group LLC)
    • New RCF Commitment Party (HPS Investment Partners LLC)
      • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Kelly DiBlasi, Damian Ridealgh) & (local) Morris Nichols Arsht & Tunnell LLP (Curtis Miller, Matthew Talmo)

Updated 12/13/17

New Chapter 11 Filing - Pacific Drilling S.A.

Pacific Drilling S.A.

  • 11/12/17 Recap: Another offshore driller finds its way into bankruptcy and, boy!, does its filing attempt to paint one rosy optimistic picture of its particular "competitive strength[]" in the offshore drilling space. But, first, let's take a step back: here, Pacific Drilling ($PACDF), an offshore drilling company formed in 2011 under Luxembourg law, filed bankruptcy in the Southern District of New York after over a year - and we mean YEAR - of speculation that this would end up where it now is. After all, when oil prices are where they are and you provide global ultra-deepwater drilling and complex well construction services to the oil and natural gas industry with high-specification drillships generally stationed in the Gulf of Mexico, the Federal Republic of Nigeria and the Islamic Republic of Mauritania, well, we'd venture an educated guess that the math simply ain't gonna add up. Certainly not at "day rates" averaging an estimated $155k. And so the company has three drillships contracted currently: two on short term agreements and, luckily, one at a well-above market contractual dayrate through September 2019. The others sit "smart-stacked." Choice quote, "My view in light of over 20 years in the industry is that recovery in the market for drilling contracts is a question of “when” not “if”. Pacific Drilling continues to have advantages over competitors with older fleets, as high-specification drilling units are generally better suited to meet the requirements of customers for drilling in deepwater, complex geological formations with challenging well profiles or remote locations. Furthermore, the uniformity and mobility of the Company’s fleet allow a Smart Stacking strategy that will continue to yield cost savings and flexibility if the downturn is prolonged." Clearly those advantages weren't so clear as to form consensus around the negotiating table with the various parties in interest as there is no restructuring support agreement in place here. Nothing like a good old-fashioned free fall into bankruptcy court, an increasingly-rare occurrence these days. 
  • Jurisdiction: S.D. of New York
  • Capital Structure: $3.188b total debt. Ship Group A Debt: $475mm RCF (Citibank NA), $750mm '20 5.375% Notes (Deutsche Bank Trust Company Americas), $718mm Term Loan B Credit Facility (Citibank NA). Ship Group B Debt (SSCF): $492.5mm 3.75% commercial tranche and $492.5mm (Wilmington Trust NA), combined post-amort equaliing $661.5mm outstanding. Ship Group C Debt: $438.4mm '17 7.25% senior secured notes (Deutsche Bank Trust Company Americas)
  • Company Professionals:
    • Legal: Sullivan & Cromwell LLP (Andrew Dietderich, Brian Glueckstein, John Hardiman, Noam Weiss) & Togut Segal & Segal LLP (Albert Togut, Frank Oswald, Scott Ratner)
    • Financial Advisor: Evercore Partners International LLP 
    • Investment Banker: AlixPartners LLP (James Mesterharm)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • RCF Agent: Citibank NA
      • Legal: Shearman & Sterling LLP (Fredric Sosnick)
      • Financial Advisor: PJT Partners LP
    • Ad Hoc Group of RCF Lenders
      • Legal: White & Case LLP
    • SSCF Agent: Wilmington Trust NA
      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Tyson Lomazow, Matthew Brod)
      • Financial Advisor: Moelis & Company LLC
    • Ad Hoc Group of Ship Group C Debt, 2020 Notes and Term Loan B
      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Elizabeth McColm, Christopher Hopkins)
      • Financial Advisor: Houlihan Lokey
    • 2017 and 2020 Notes Indenture Trustee(s): Deutsche Bank Trust Company Americas
      • Legal: Moses & Singer LLP
    • Large Equityholder: Quantum Pacific (Gibraltar) Limited
      • egal: Skadden Arps Slate Meagher & Flom LLP (Jay Goffman, George Howard)

Updated 11/15/17 at 5:09 pm CT

New Chapter 11 Filing - Castex Energy Partners LP

Castex Energy Partners LP

  • 10/17/17 Recap: People have been saying that there is still more oil and gas distress to work its way through the system, particularly offshore-related companies. Well, here, Castex Energy Partners LP, a Houston-based onshore and offshore oil and natural gas exploration and production company located primarily on the coasts of Louisiana and Texas filed for bankruptcy to effectuate a restructuring support agreement with its major parties in interest. The company owns interests in approximately 375 wells (predominantly onshore); it also holds interests in certain seismic interests and specific lands. Like most other oil and gas E&P companies, Castex faced "intense financial pressure" due to the decrease in price of oil and gas and consequent decrease in demand for drilling. The company's EBITDA declined 70% from 2014 to 2016. Yes, you read that right: 70%. Of course, it didn't help that the company made an inopportune decision to invest heavily in offshore development in 2014, outlaying $259mm "in anticipation of future developmental drilling." Timing couldn't have been worse, it seems. Also, the company simply forgot to hedge, apparently; it "was mildly hedged and was exposed to [a massive nat gas] drop." Given all of that, the playbook is pretty un-extraordinary: strapped with a nice chunk of bank debt, the company attempted to make operational cuts to help sustain cash flow while simultaneously running a sales process through Evercore Partners Inc. That process failed. So, now, the company has $4mm of cash on hand and a $15mm DIP credit facility commitment from its prepetition lenders and a restructuring support agreement between it, Capital One Bank, Castex Energy Inc., and the RBL Lenders. The company plans to equitize certain prepetition lenders' debt and emerge from bankruptcy in Q1 of '18. 
  • Jurisdiction: S.D. of Texas (Judge Isgur)
  • Capital Structure: $400mm debt (Capital One Bank (USA) NA)    
  • Company Professionals:
    • Legal: Kelly Hart & Pitre LLP (Louis Phillips, Peter Kopfinger, Amelia Bueche, Patrick Shelby)
    • Restructuring Advisor: Alvarez & Marsal LLC (Ryan Omohundro)
    • Financial Advisor: Evercore Partners Inc.
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Castex Energy Inc.
      • Legal: Norton Rose Fulbright LLP (Kristian Gluck, Gregory Wilkes, Shivani Shah)
    • Prepetition & DIP Admin Agent: Capital One Bank (USA) NA & Consenting Lenders (Amegy Bank, Whitney Bank, IberiaBank, Frost Bank, Cross Ocean, Comerica Bank, Citibank NA, Bank of America Credit Products Inc., Capital One NA)
      • Legal: O'Melveny & Myers LLP (George Davis, Michael Lotito, Daniel Shamah) & (local) Porter Hedges LLP (John Higgins, Amy Geise)
      • Financial Advisor: RPA Advisors LLC
    • Riverstone V Castex 2005 Intermediate Holdings LLC
      • Legal: Vinson & Elkins LLP (Bradley Foxman, Paul Heath)

Updated 10/26/17

New Chapter 11 Filing - Gulfmark Offshore Inc.

Gulfmark Offshore Inc.

  • 5/17/17 Recap: Everyone has been waiting for the offshore action and it's finally here. Except, its fairly anticlimactic. Here, the publicly-traded Houston-based offshore oil and gas logistics services provider filed for bankruptcy to effectuate a financial restructuring pursuant to a Restructuring Support Agreement signed with holders of its unsecured senior notes. The noteholders will get approximately 36% of the equity in the newly reorganized company along with rights to purchase an additional 60% equity slug pursuant to a backstopped $125mm rights offering. Existing equity will get a small equity "kiss" and some warrants. This is so boring that EVEN WE can't really find much to make fun of. 
  • Jurisdiction: D. of Delaware
  • Capital Structure: $100mm RCF ($72mm funded)(Royal Bank of Scotland), NOK600mm Norwegian Facility ($44.3mm funded)(DNB Bank ASA), $430mm '22 6.375% unsecured senior notes (funded)(US Bank NA)    
  • Company Professionals:
    • Legal: Weil (Gary Holtzer, Ronit Berkovich, Debora Hoehne) & (local) Richards Layton & Finger PA (Mark Collins, Zachary Shapiro, Brett Haywood, Christopher De Lillo)
    • Financial Advisor: Alvarez & Marsal LLC (Brian Fox, Kevin Larin, RIchard Niemerg, Don Koetting, Lacie Melasi, Robert Country)
    • Investment Banker: Evercore Group LLC (Stephen Hannan, David Andrews, Sachin Lulla, Pranav Goel, Arth Patel)
    • Claims Agent: Prime Clerk LLC (*click on company name above for access to free docket)
  • Other Parties in Interest:
    • Indenture Trustee: US Bank NA
      • Legal: Foley & Lardner LLP (Derek Wright, Mark Prager)
    • Ad Hoc Group of Unsecured Noteholders
      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Evan Fleck, Nelly Almeida) & (local) Morris Nichols Arsht & Tunnell LLP (Gregory Werkheiser, Robert Dehney)
        • Financial Advisor: Houlihan Lokey Capital Inc.
    • Prepetition Multicurrency RCF Lender: Royal Bank of Scotland
      • Legal: Sullivan & Cromwell LLP (Michael Torkin, Brian Glueckstein, David Zylberberg) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Joseph Barry, Ian Bambrick)
      • Financial Advisor: FTI Consulting Inc.
    • Prepetition NOK Lender: DNB Bank ASA
      • Legal: Hughes Hubbard & Reed LLP (Christopher Kiplok, Anson Frelinghuysen, Erin Diers) & (local) Bayard PA (Erin Fay)
      • Financial Advisor: Guggenheim Securities LLC
    • Gulfmark Rederi AS
      • Legal: Norton Rose Fulbright US LLP (Jason Boland, William Greendyke) & (local) Womble Carlyle Sandridge & Rice LLP (Matthew Ward)

Updated 7/12/17 9:301 am CT

New Chapter 15 Filing - Ocean Rig UDW Inc.

Ocean Rig UDW Inc.

  • 3/28/17 Recap: Offshore drilling contractor files for bankruptcy under Chapter 15 to EFF the "vulture investors." Seriously. The Company has secured a TRO to block creditors from obstreperously vulturing their way through a potential debt restructuring. While we're somewhat serious about the foregoing, the Company is also in the midst of four interrelated schemes of arrangement and the Chapter 15 is meant to give the Company breathing room to effectuate a debt-for-equity swap thereunder - exchanging $3.7b of debt for new equity, $450mm of new secured notes, and $288mm of cash. The cause of impairment is the obvious: an "unprecedented decline in recent years in petroleum prices and exploration and development activity," which made interest coverage and refinancing difficult.  
  • Jurisdiction: S.D. of New York
  • Capital Structure: $1.83b '20 TLB, $1.27b '21 TLB, $460mm '17 6.5% DRH secured notes (U.S. Bank NA), $423mm '19 7.25% unsecured notes .     
  • Company Professionals:
    • Legal: Orrick Herrington & Sutcliffe LLP (Evan Hollander, Raniero D'Aversa Jr., Monica Perrigno, Ayanna Lewis-Gruss)
    • Financial Advisor: AlixPartners LLC (Eleanor Fisher, Simon Appell)
    • Investment Banker: Evercore
    • Information Agent: Prime Clerk LLC
  • Other Parties in Interest:
    • Highland Floating Rate Opportunities Fund, Highland Global Allocation Fund, Highland Opportunistic Credit Fund, Highland Loan Master Fund LP, NexPoint Credit Strategies Fund 
      • Legal: Venable LLP (Jeffrey Sabin, Konstantinos Katsiris, Carol Weiner Levy)
    • Ad Hoc Group of TL Lenders
      • Legal: Milbank Tweed Hadley & McCloy LLP (Gerard Uzzi, Mark Shinderman, James Behrens, Brian Kinney)
    • Ad Hoc Group of Holders of 6.5% DRH Secured Notes
      • Legal: Kirkland & Ellis LLP (Jayme Sprayragen, Edward Sassower, Brian Schartz, Patrick Nash)
    • Indenture Trustee: US Bank, NA
      • Legal: Kelley Drye & Warren LLP (James Carr, Benjamin Feder)

Updated 3/31/17 3:53 pm

New Chapter 11 Filing - Vanguard Natural Resources

Vanguard Natural Resources

  • 2/2/17 Recap: Houston-based oil and gas producer files chapter 11 pursuant to a restructuring support agreement that, if implemented, will permit the company to cut over $700mm of debt. The company has secured a $50mm DIP. 
  • Jurisdiction: SD of Texas
  • Capital Structure: $1.372b '18 L+250 RBL (Citibank N.A.), $76mm '20 7% second lien notes, $51'm '19 8.375% unsecured notes (Wilmington Trust), $382mm '20 7.875% unsecured notes (UMB Bank)    
  • Company Professionals:
    • Legal: Paul Hastings LLP (Chris Dickerson, James Grogan, Todd Schwartz, Alexander Bongartz, Brendan Gage)
    • Financial Advisor: Opportune LLP (Scott Anchin)
    • Investment Banker: Evercore Partners (Daniel Aronson, Marco Acerra)
    • Claims Agent: Prime Clerk (*click on company name for docket)
  • Other Parties in Interest:
    • Ad Hoc Group of 2L noteholders (Fir Tree Inc., Wexford Capital LP, York Capital Management Global Advisors)
      • Legal: Morrison & Foerster LLP (Jonathan Levine, John Pintarelli, Daniel Harris) & (local) Jackson Walker LLP (Monica Blacker, Matthew Cavenaugh)
    • Ad Hoc Committee of Senior Noteholders & UMB Bank NA
      • Legal: Milbank (Dennis Dunne, Andrew LeBlanc, Samuel Khalil) & (local) Porter Hedges LLP (John Higgins, Eric English)
      • Investment Bank: PJT Partners Inc.
    • RBL Lender: Citibank NA
      • Legal: Weil (Stephen Karotkin, Joseph Smolinsky, Blaire Cahn, Christopher Lopez)
    • UMB Bank
      • Legal: Kelley Drye & Warren LLP (Eric Wilson, Benjamin Feder, T. Charlie Liu)
    • Wilmington Trust
      • Legal: Pryor Cashman LLP (Seth Lieberman, Patrick Sibley, Matthew Silverman) & (local) Cole Schotz PC (Michael Warner, Benjamin Wallen)
    • Independent Directors of the Board
      • Legal: Andrews Kurth Kenyon LLP (Robin Russell, Tad Davidson, Joseph Buoni)
    • Unsecured Noteholder & Preferred Unitholder: Panning Capital Management 
      • Legal: Munger Tolles & Olson LLP (Thomas Wolper, Seth Goldman) & (local) Norton Rose Fulbright US LLP (William Greendyke, Jason Boland, Bob Bruner, Louis Strubeck) 
    • Ad Hoc Equity Committee
      • Legal: Gardere Wynne Sewell LLP (John Melko, Sharon Beausoleil, Michael Riordan, Sean Wilson, Holland O'Neil)
    • Official Committee of Unsecured Creditors
      • Legal: Akin Gump (Charles Gibbs, Michael Stamer, Abid Qureshi, Meredith Lahaie, Kevin Zuzolo)
      • Financial Advisor: FTI Consulting

Updated 3/22/17

 

New Chapter 11 Filing - Azure Midstream Partners LP

Azure Midstream Partners LP

  • 1/30/17 Recap: Spurned on by the potential riches guaranteed by $105 crude oil and $3.68 natural gas, Azure Midstream Partners - a master limited partnership headquartered in Dallas - invested heavily in natural gas pipeline in 2015, incurring hundreds of millions of debt to fund the expansion. Shortly thereafter, oil sank to $26 and natural gas to $1.62. With the industry in turmoil, capex budgets contracted considerably and the company’s largest contract counterparties terminated or lapsed contracts (including Anadarko Petroleum Corporation), materially reducing EBITDA and triggering covenant defaults. Now, the company seeks to sell its assets in bankruptcy and liquidate the rest. Discussions with a stalking horse bidder hadn’t been finalized at the time of filing.
  • Capital Structure: $175mm debt (Wells Fargo Bank NA)     
  • Company Professionals:
    • Legal: Weil (Gary Holtzer, Robert Lemons, Charles Persons, Chris Lopez, Katherine Doorley, David Zubkis) & Vinson & Elkins LLP (Bradley Foxman)
    • Financial Advisor: Alvarez & Marsal LLC (Ed Mosley)
    • Investment Banker: Evercore Group LLC (Stephen Hannon)
    • Claims Agent: KCC (*click on company name for docket)
  • Other Parties in Interest:
    • Wells Fargo Bank
      • Legal: Baker & McKenzie (James Donnell, Peter Goodman, Frank Grese)
      • Financial Advisor: RPA Advisors
    • M5 Midstream LLC
      • Locke Lorde LLP (Elizabeth Guffy)
    • Official Equity Committee (Wampanoag Capital LLC)
      • Legal: Brown Rudnick LLP (Howard Steel)

Updated 5/2/17