May 8, 2019
If it walks like a chapter 22 and quacks like a chapter 22…it…may…not…actually…be a chapter 22??
Triangle Petroleum Corporation (“TPC”) filed a prepackaged plan of reorganization with the District of Delaware to consummate a balance sheet restructuring. TPC is an independent energy holding company with a focus on the Williston Basin of North Dakota; its assets include a joint venture interest in Caliber Midstream Holdings LP, a midstream services company, leases of commercial and multi-unit residential buildings in North Dakota, and net operating losses. On the debt side of the balance sheet, the company had a $120mm 5.0% convertible promissory note issued to NGP Triangle Holdings, LLC (“NGP”).
So, what’s up with that convertible note? Wholly-owned direct or indirect subsidiaries of TPC — including Triangle USA Petroleum Corporation — filed for bankruptcy back in June 2016 to address their capital structure and, in the course of confirming a plan of reorganization, wiped out their stock. That stock, naturally, was an asset of TPC and, consequently, the New York Stock Exchange delisted TPC, constituting a “Fundamental Change,” under the note and triggering a requirement that TPC repurchase the convertible note for $154mm. TPC didn’t do so. Upon failing to do so, TPC triggered an event of default. Subsequently, J.P. Morgan Securities LLC (“JPMS”) purchased the note from NGP.
Thereafter, as part of discussions about a forbearance, JPMorgan Chase Bank NA provided the company with a term loan and the company and JPMS amended and restated the convertible note, granting JPMS a second lien in the process. JPMS, however, ultimately concluded that forbearing to nowhere wasn’t exactly a great strategy and so the chapter 11 filing will leave the term loan unimpaired, swap JPMS’ second lien secured note for 100% of TPC’s equity, ride through (what is a de minimis amount of) unsecured claims and wipe out equity, which had been trading over the counter. As of the petition date, the company had $2mm outstanding under the term loan and $167mm outstanding under the newly secured note.
Given that JPMS is the only voting party, this is a pretty easy plan to effectuate. Suffice it to say, JPMS voted yes to the prepackaged plan which means, going forward, it will own the interests in Caliber, Bakken Real Estate and, significantly, the valuable net operating losses.
Jurisdiction: D. of Delaware (Judge Walrath)
Capital Structure: see above.
Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Kelley Cornish, Alexander Woolverton) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Andrew Magaziner, Shane Reil)
Board of Directors: Gus Halas, James Shein, Randal Matkaluk
Financial Advisor: Development Specialists Inc. (Mark Iammartino)
Claims Agent: Epiq Corporate Restructuring LLC (*click on the link above for free docket access)
Other Parties in Interest:
Prepetition Lender: JPMorgan Chase Bank NA & J.P. Morgan Securities LLC
Legal: Duane Morris LLP (Lawrence Kotlar, Joel Walker)