CorEnergy Infrastructure Trust reached an agreement with certain of its noteholders on a comprehensive financial restructuring that will reduce debt and restructure its balance sheet. The ad hoc group of noteholders, whose members hold approximately 90% of CorEnergy’s 5.875% unsecured convertible senior notes due 2025, has entered into a restructuring support agreement (RSA) with the company.
“Restructuring our debt will help to right-size our capital structure for the smaller scale of the enterprise following the MoGas and Omega sale, building on our efforts to increase liquidity through a combination of asset sales and tariff increases,” Dave Schulte, chairman and CEO of CorEnergy, said. “As we move through the reorganization process, we intend to continue to meet all obligations to our valued customers, employees, vendors and partners, and we expect Crimson Pipeline will also continue to operate normally. Our case for rate relief before the California Public Utilities Commission must be resolved favorably to ensure the future viability of the Crimson Pipeline assets, which continue to provide a critical service to shippers in that state.”
To implement the RSA, CorEnergy has filed a voluntary Chapter 11 proceeding in the U.S. Bankruptcy Court for the Western District of Missouri. Neither Crimson Pipeline, in which CorEnergy holds a noncontrolling joint interest, nor any other CorEnergy subsidiary has filed for bankruptcy. Both the company and Crimson Pipeline expect to have sufficient liquidity to continue operating without interruption during and after CorEnergy’s restructuring process.
The case is being filed on a prearranged basis to allow for rapid implementation of the RSA, with the RSA parties already having agreed to support the company’s plan of reorganization. The proceeding is intended to facilitate a restructuring of the company’s capital structure only, with no plans for trade impairment or other contract rejections. Consistent with the terms of the RSA, the plan provides for the treatment for each creditor class as follows:
- Senior Notes: The senior notes will be exchanged for cash, $45 million in new secured debt with a five-year term and a 12.0% coupon and approximately 89% of the equity in a reorganized CorEnergy, subject to dilution from the management incentive plan and adjustment based on final cash available upon emergence.
- General unsecured claims (including trade claims): Paid in full in cash.
- Existing preferred equity: Holders of CorEnergy’s existing preferred equity and securities that are convertible into preferred equity will receive the remaining approximately 11% of the equity of the reorganized CorEnergy, also subject to dilution from the management incentive plan and adjustment based on final cash available upon emergence.
- Common stock: All outstanding common stock will be cancelled.
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The company aims to complete this restructuring process and emerge from bankruptcy in the second quarter of 2024 as a real estate investment trust. The RSA parties share a common commitment to strong corporate governance and robust disclosure that will facilitate the reorganized company’s plan to pursue trading on the OTC following emergence, providing enhanced liquidity to owners while reducing overhead expenses to a level commensurate with the reorganized company’s smaller size.
Additional information on the RSA will be filed on a Form 8-K with the U.S. Securities and Exchange Commission.
CorEnergy has retained Husch Blackwell as legal counsel, Teneo Capital as its financial advisor and Miller Buckfire as its investment banker. The ad hoc group of noteholders has retained Faegre Drinker Biddle & Reath as its legal counsel and Perella Weinberg Partners and TPH&Co., the energy business of Perella Weinberg Partners, as its investment bankers.
Court filings and information about the Chapter 11 case is available on a separate website (https://cases.stretto.com/corenergy) administered by CorEnergy’s claims agent, Stretto.
