Legacy Reserves has executed a global restructuring support agreement with its lenders under its reserve based revolving credit facility; its lenders under its second lien term loan; and a group of the company’s unsecured noteholders.
The proposed financial restructuring will provide the company with go-forward liquidity and a right-sized pro forma capital structure while minimizing operational disruptions by ensuring trade creditors will be paid in full.
The Global RSA represents a broad agreement of creditor constituencies across all tranches of the company’s capital structure on the terms of a pre-arranged plan of reorganization (that the parties have agreed to support. The Global RSA contemplates a $256.3 million backstopped equity commitment and rights offering, $500 million in committed exit financing from certain of the existing RBL Lenders, the equitization of approximately $797.2 million of principal outstanding debt, a potential additional equity investment of $125 million, and payment in full of the Company’s trade and other unsecured creditors.
The company expects to file voluntary petitions for reorganization in the U.S. Bankruptcy Court for the Southern District of Texas to facilitate the financial restructuring and implement the plan contemplated by the Global RSA. Consummation of the plan, including the infusion of new equity, will be subject to confirmation by the court in addition to the other conditions to be set forth in the plan and related transaction documents.
The company will continue to operate its business in the normal course without material disruption to its vendors, partners or employees, and expects to have sufficient liquidity to meet its financial obligations during the restructuring.
According to a related 8-K filing, with court approval, Wells Fargo will serve as administrative agent for up to $100 million in DIP financing and will refinance portions of the company’s existing reserve-based credit facility.
“After exploring all options and months of negotiations, we are very pleased to have reached an agreement for a consensual restructuring with our RBL Lenders, Second Lien Lenders and the Noteholder Group. We believe that the restructuring contemplated by the Global RSA will provide us with the capital structure and liquidity to compete and grow in today’s challenging oil and gas environment. We plan to continue working with our creditor constituencies to move through the restructuring process expeditiously with minimal operational disruptions,” said CEO Dan Westcott.
Perella Weinberg Partners and its affiliate, Tudor Pickering Holt, is acting as financial advisor for the company, Sidley Austin is acting as legal advisor, and Alvarez & Marsal is acting as restructuring advisor. PJT Partners is acting as financial advisor the second lien lenders, and Latham & Watkins is acting as legal advisor. Houlihan Lokey is acting as financial advisor for the Noteholder Group, and Davis Polk & Wardwell is acting as legal advisor. RPA Advisors is acting as financial advisor to Wells Fargo Bank, as administrative agent for the RBL Lenders, and Orrick Herrington & Sutcliffe is acting as legal advisor.
Legacy Reserves is an independent energy company engaged in the development, production and acquisition of oil and natural gas properties in the U.S.
