Bonanza Creek Energy entered into a restructuring support agreement (RSA) with certain holders of its outstanding senior notes, one of its crude oil purchase and sale pipeline counterparties, NGL Crude Logistics and its parent, NGL Energy Partners, to effectuate a proposed prepackaged plan of reorganization.
The reorganization will significantly deleverage the company’s balance sheet and provide the company with $200 million of additional liquidity from an equity rights offering backstopped by certain holders of the senior notes. The RSA contemplates that the company will commence its prepackaged bankruptcy case in the U.S. Bankruptcy Court for the District of Delaware on or prior to January 5, 2017.
The company is currently engaged in discussions with KeyBank as administrative agent under the company’s revolving credit facility, with respect to both the treatment of the revolving credit facility in a Chapter 11 proceeding and the terms of a renegotiated revolving credit facility after emergence from Chapter 11.
All aspects of the plan remain subject to bankruptcy court approval and the satisfaction of conditions set forth in the plan.
Richard Carty, Bonanza Creek’s CEO, said, “During 2016 we have been working diligently to reduce our cost structure and improve operating efficiencies under our commitment to rapid continuous improvement initiatives. The RSA announced today further increases our competitive position with significant improvements in firm transportation commitments, a comprehensive elimination of more than $850 million in unsecured balance sheet principal, accrued interest and prepayment premiums, and a concurrent injection of $200 million in equity to fund our go-forward development plan.”
Upon effectuation, the consensual financial restructuring would, among other things:
- Eliminate more than $850 million of principal, accrued interest and prepayment premiums in respect of the senior notes
- Restructure Bonanza Creek’s crude oil purchase and sale agreement with NGL on more favorable terms to the company
- Pay all customer, employee, royalty and working interest obligations in full in the ordinary course
- Provide the company’s existing shareholders, in exchange for the releases by such shareholders of the released parties (as defined in the plan), with consideration in the form of 4.5% of reorganized Bonanza Creek’s equity on the effective date (subject to dilution by a rights offering for new equity, a management incentive plan, and warrants for existing equity holders) and three-year warrants to acquire up to 7.5% of equity in reorganized Bonanza Creek
Davis, Polk & Wardwell is acting as legal counsel, Perella Weinberg Partners is acting as financial advisor and Alvarez & Marsal North America is acting as restructuring advisor to the company in connection with its restructuring efforts. Kirkland & Ellis is acting as legal counsel, and Evercore Group is acting as financial advisor to the ad hoc committee of noteholders.
Bonanza Creek Energy is an independent oil and natural gas company engaged in the acquisition, exploration, development and production of onshore oil and associated liquids-rich natural gas in the U.S.