Sundance Energy, an onshore independent oil and natural gas company, filed for voluntary Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas. All operations will continue as usual without interruption and the Chapter 11 process is expected to conclude in approximately 60 days.

Sundance entered into a restructuring support agreement with the administrative agent under its prepetition reserve-based revolving credit facility (the RBL facility), holders of 100% of the outstanding principal amount of revolving loans under the RBL facility, the administrative agent under the prepetition term loan (the term loan facility) and holders of 100% of the outstanding principal amount of term loans under the term loan facility, whereby the parties agreed to support the company’s prepackaged plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code. The prepackaged plan provides for a debt-for-equity exchange that will eliminate more than $250 million of funded debt obligations from the company’s balance sheet.

Under the prepackaged plan, which remains subject to approval by the bankruptcy court and consummation, existing equity interests would be cancelled on the effective date and holders of existing equity interests are not expected to receive any consideration or distributions on account of such interests.

Sundance Energy also secured commitments from certain of its term loan lenders for at least $45 million in debtor-in-possession financing that, along with normal operating cash flows and the consensual use of cash collateral, will fund normal-course operations and reorganization expenses.

Upon emergence, the company’s recapitalized balance sheet will include (i) $137.5 million of funded indebtedness comprised of a senior secured reserve-based revolving credit facility, a senior secured second out term loan and, if necessary, a senior secured third out term loan, in each case provided by the existing RBL facility lenders; and (ii) new common equity interests issued in exchange for DIP financing claims and term loan claims, subject to dilution by new common equity interests granted under a new management incentive plan.

“Sundance has faced numerous challenges in the last few years, resulting in declining cash flow and liquidity that have only been exacerbated by the unprecedented COVID-19 pandemic and volatility in the market price of crude oil and natural gas,” Eric McCrady, CEO of Sundance, said. “As a result, we are taking decisive action to address these challenges and deleverage our balance sheet to best position our business for sustained future success. We are grateful for the support of our lenders throughout this process and anticipate that the consensus already achieved will simplify our path through Chapter 11 and enable us to emerge with a strengthened financial structure.”

Sundance expects to continue operations uninterrupted through the Chapter 11 process. The company filed customary motions with the bankruptcy court seeking authority for it to continue operations in the ordinary course, including, but not limited to, paying employees and continuing existing benefit programs, paying royalty owners and vendors in the normal course, and meeting commitments to customers, including crude buyers. The company also filed a customary motion seeking to implement equity trading procedures in an effort to preserve the value of the company’s tax attributes. Sundance anticipates that these motions will be heard and approved in the first few days of the Chapter 11 cases. In addition, the RSA and prepackaged plan contemplate that unsecured trade creditors will be paid in full under the prepackaged plan.

Latham & Watkins, Hunton Andrews Kurth, Miller Buckfire and FTI Consulting are representing Sundance.