Superior Energy Services entered into a restructuring support agreement with a group of its senior noteholders that collectively hold or control approximately 69.2% of the company’s senior unsecured notes. The proposed comprehensive financial recapitalization would deleverage 100% of Superior’s long-term debt and related interest costs, provide access to additional financing, and establish a capital structure that the company believes will allow it to traverse a low-commodity-price environment. The transactions contemplated by the RSA are expected to close before the end of 2020.
Superior expects to implement the transactions contemplated by the RSA through a “pre-packaged” plan of reorganization through the filing of voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the Southern District of Texas. Superior intends to continue engaging in discussions with its creditors that are party to the RSA. Senior noteholders that execute the RSA within five business days of the date of the RSA will receive a cash payment equal to the amount of outstanding accrued interest on such senior noteholders’ notes.
The RSA contemplates that Superior will continue operating its businesses and facilities without disruption to its customers, vendors and employees, including that all trade claims against the company (whether arising prior to or after the commencement of the Chapter 11 cases) will be paid in full in the ordinary course of business.
“The Superior team and our many partners have worked tirelessly to lessen the impacts of external challenges on the company in recent months,” David Dunlap, president and CEO of Superior, said. “I would like to express my gratitude to all of our loyal employees, customers and vendors for their ongoing support of our business. We do not anticipate any operational interruptions as a result of this announcement and we feel that our ‘fortress’ balance sheet and strategic positioning following the restructuring will allow us to continue to provide the same quality of high-end products and services to our customers.”
As part of the recapitalization, Superior and the ad hoc noteholder group are contemplating separating Superior’s business into two separate companies. To the extent the separation occurs, Superior’s U.S. onshore businesses, including service rigs, coiled tubing, wireline, pressure control, flowback, fluid management, accommodations, and discontinued pressure pumping assets would become a new consolidation platform for U.S. onshore assets (NAM). Superior’s service lines would remain with Superior, including drill pipe rentals, bottom hole assemblies, completion tools and products, hydraulic workover, snubbing and production services, and well control services (RemainCo).
Under the terms of the RSA, Superior’s senior noteholders have the right to decide whether or not to separate the business into two companies (RemainCo and NAM) upon completion of the restructuring transactions.
A separation of NAM and RemainCo would result in the following economic terms upon emergence from Chapter 11:
- RemainCo: Superior’s senior noteholders would receive 98.5% of RemainCo’s equity, while existing shareholders would receive 1.5% of such equity (along with five-year warrants to purchase 10% of RemainCo equity at a price equivalent to par plus accrued interest on the senior unsecured notes (the RemainCo warrants)), in each case subject to dilution on account of a management incentive plan (the MIP) and RemainCo warrants.
- NAM: Superior’s senior noteholders would receive 95% of NAM’s equity, while existing shareholders would receive 5% of such equity, in each case subject to dilution from the MIP.
If Superior remains consolidated, upon emergence from Chapter 11, the company’s senior noteholders would receive 98% of consolidated Superior’s equity, while existing shareholders would receive 2% of such equity (along with five-year warrants to purchase 10% of consolidated superior equity at a price equivalent to par plus accrued interest on the notes (the consolidated superior warrants)), in each case subject to dilution from the MIP and the consolidated superior warrants.
Superior is in discussions with its credit providers to secure financings that would be provided under either scenario. Additionally, certain members of the ad hoc noteholder group executed a commitment letter to provide up to $200 million in a delayed draw term loan to consolidated Superior or RemainCo, if needed.
Ducera Partners and Johnson Rice & Company are acting as financial advisors for Superior, while Latham & Watkins is acting as legal counsel and Alvarez & Marsal is acting as restructuring advisor. Evercore is acting as financial advisor for the ad hoc noteholder group and Davis Polk & Wardwell is acting as legal counsel.
Superior Energy Services serves the drilling, completion and production-related needs of oil and gas companies through a portfolio of specialized oilfield services and equipment.