California Resources Corporation will complete its financial restructuring and emerge from bankruptcy with a $540 million revolving credit facility, $300 million of secured notes and $200 million of second lien term loan from Ares.
CRC’s joint plan of reorganization in its Chapter 11 case cancelled pre-existing debt and consolidated its ownership in the Elk Hills power plant and cryogenic gas plant. The plan also provided for the payment in full of all valid and undisputed trade and contingent claims in the ordinary course of business.
CRC will officially conclude its reorganization after completing all required actions and satisfying the remaining conditions of the plan.
“With the full support of our stakeholders and a much stronger balance sheet, the restructured CRC is well designed to withstand price cycles and continue delivering affordable, sustainable and reliable energy that is so essential to Californians. You can expect CRC to build upon the fundamental strengths of our business that provide us a high degree of operating flexibility, including our low-decline conventional oil production, low capital intensity, exposure to the Brent crude oil markets, substantial mineral ownership in fee, and integrated infrastructure. We believe the streamlined CRC and our commitment to disciplined capital allocation will serve as a strong foundation to deliver free cash flow. CRC is committed to fostering sustainable energy production to meet the future needs of all Californians. I would also like to thank our employees for their dedication, focus and effort to sustain our proven track record of safety, environmental stewardship and operational excellence during the restructuring process,” Todd Stevens, president and CEO of CRC said.
CRC entered into a settlement and assumption agreement with certain affiliates of Ares Management related to CRC’s and Ares’ Elk Hills joint venture. Under this agreement, CRC acquired the equity interests of the joint venture and 100% ownership of the Elk Hills power plant and a cryogenic gas processing plant in exchange for approximately 20.8% of the new common stock in CRC and $300 million of secured notes issued by EHP Midco Holding Company, a subsidiary of CRC. As a result, the joint venture’s assets are now wholly-owned by CRC.
Under the plan approved by the bankruptcy court, approximately $4.4 billion of loans and notes outstanding as of June 30, 2020 have been equitized. Additionally, all of the company’s previously existing equity interests have been cancelled and ceased to exist after the market close on Oct. 27, 2020. In connection with its emergence, shares of the company’s new common stock have been approved for listing on the New York Stock Exchange under the ticker symbol “CRC” and trading is expected to commence today.
At emergence, CRC will have approximately 83.3 million shares of new common stock issued and outstanding, which includes shares representing 32.5% of new common stock issued to holders of loans and notes pursuant to the plan, shares representing 45.7% of new common stock issued in connection with a fully backstopped $450 million rights offering that was fully subscribed and is effective upon emergence, as well as shares representing 20.8% of new common stock issued in the Ares settlement described above. CRC also issued Tier 1 Warrants and Tier 2 Warrants to acquire up to 2% and 3% of new common stock, respectively, at a “strike price” to be calculated using a $3 billion aggregate equity value, which are valid for four years.
At emergence, CRC entered into a new revolving credit facility with a $1.2 billion borrowing base and a commitment level of $540 million. The facility matures on April 27, 2024. CRC has a net borrowed position of approximately $37 million on the facility at emergence, which is net of unrestricted cash of $70 million and $118 million used to cash collateralize on an interim basis certain letters of credit outstanding under CRC’s senior debtor-in-possession credit facility. CRC’s capital structure also includes a $200 million second lien term loan and $300 million of secured notes due 2027 issued to Ares in connection with the Ares settlement described above. CRC is well-capitalized at emergence with more than $345 million of available liquidity.
