Alvarez & Marsal North America served as restructuring advisor, Evercore served as financial advisor and Kirkland Ellis served as legal counsel to Tapstone Energy in connection with the conclusion of a comprehensive financial restructuring of the oil and natural gas company.
“I want to personally thank all our dedicated employees, whose focus during this process enabled us to maintain full flexibility during this period,” Steve C. Dixon, CEO of Tapstone Energy, said. “The outcome of this process establishes Tapstone as an entity ready to consolidate assets in the Mid-Continent. We are eager to turn our focus on acquiring producing properties and evaluating merger candidates.”
The restructuring plan recapitalized Tapstone’s balance sheet and fortified its liquidity by reducing long-term debt and interest expense. Highlights of the out-of-court transaction are as follows:
- 100% of the company’s existing traditional credit facility lenders agreed to exchange their outstanding secured indebtedness into a combination of a new four-year secured term loan of approximately $145 million and common equity in Tapstone.
- 99.5% of the company’s existing 9.75% 2022 senior noteholders agreed to exchange their existing unsecured notes into a new four-year unsecured term loan of approximately $5 million and common equity in Tapstone.
- Kennedy Lewis Investment Management, a credit manager, is investing $50 million of new capital in the form of preferred equity in Tapstone to pursue acquisitive growth in the Mid-Continent region.
- By extinguishing approximately $450 million of principle debt, the transaction leaves Tapstone with more than $60 million in liquidity, a current mark-to-market hedge book of approximately $55 million, a significantly deleveraged balance sheet and a dedicated team of investors and the flexibility to pursue growth through acquisitions.
“The success of our restructuring is a significant accomplishment given the current environment in the energy industry and the broader economy,” John J. Kilgallon, CFO of Tapstone Energy, said. “We greatly appreciate the collaboration of all stakeholders to reach this resolution. When including the new investment from Kennedy Lewis and the extinguishment of debt through the restructuring, our net debt has improved by approximately $500 million from start to finish in this process.”
“We are excited to partner with the Tapstone team and view the timing of this investment as the perfect opportunity to be acquiring assets as other operators need to raise capital,” Darren L. Richman, founder and co-portfolio manager of Kennedy Lewis, said. “Very proud we were able to accomplish this transaction out of court, which was enabled by the support and leadership of the agent bank and its steering committee.”
Haynes and Boone served as legal advisor and FTI Consulting served as financial advisor for the credit facility lenders. Akin Gump acted as legal advisor and Houlihan Lokey Capital acted as financial advisor for the unsecured noteholders.