Independent energy company Gastar Exploration entered into a restructuring support agreement with its largest (and only) funded-debt creditors and largest common shareholders, certain funds affiliated with Ares Management. The RSA will be implemented through a pre-packaged Chapter 11 plan of reorganization and Chapter 11 cases to be filed in the Bankruptcy Court for the Southern District of Texas.
Subject to the terms and conditions of the RSA, Ares has agreed to support the company’s restructuring, which will result in trade creditors and other operational obligations unimpaired, eliminate more than $300 million of the Company’s funded-debt obligations and preferred equity interests, cancel existing common equity interests and provide $100 million in new, committed financing to fund the restructuring process and ongoing business operations.
Gastar also entered into a separate restructuring support agreement with the counterparties to its existing hedging and swap arrangements, the company’s largest creditor constituency other than Ares. Pursuant to the hedge party RSA, the hedge parties will support the company’s restructuring in return for payment in full in monthly installments through December 2019 pursuant to a new secured note.
The agreed restructuring was developed after extensive marketing efforts failed to yield any viable proposals to repay or refinance the company’s existing indebtedness or to sell the company or its assets. Gastar needs new capital to continue to operate, and the RSA and related new capital commitment will ensure that it can continue to operate its business in the ordinary course. Post-restructuring, it will have a strengthened balance sheet that will facilitate capital investment in operations.
To implement the restructuring, the company commenced solicitation of a prepackaged Chapter 11 plan of reorganization, which will conclude on or about October 30, 2018. Shortly after the conclusion of plan solicitation, the Company intends to commence Chapter 11 cases in the Southern District of Texas.
Jerry R. Schuyler, interim CEO and Gastar board chairman, said, “The restructuring agreement we signed today is a comprehensive plan that will ensure Gastar remains competitive in its industry. We can now set our sights on facilitating a smooth, efficient in-court restructuring while continuing to meet our obligations to our employee and vendor constituencies. I am proud of the exceptional hard work and dedication of all our employees throughout this process.”
Kirkland & Ellis is serving as legal counsel to Gastar and Opportune is serving as its restructuring advisor. Perella Weinberg Partners is serving as the company’s financial advisor.
