YE Investment, an affiliation of Red Mountain Capital, notified Yuma Energy that all outstanding payments under its existing credit agreement are currently due and that its restructuring agreement with Red Mountain has been terminated.
In a press release issued on March 20, Yuma disclosed that it was not in compliance with the various terms of the restructuring agreement and related credit arrangements, and no further funds were available to Yuma under the facility.
On March 30, the company disclosed that effective March 26, 2020, J. Christopher Teets, who was appointed as a member of the board of directors on September 30, 2019, resigned as a member of the board of directors of Yuma Energy.
On April 3, Yuma and its related affiliates received written notice from Red Mountain that numerous defaults and events of default have occurred and are continuing under the credit agreement and the other loan documents, including failure to pay interest within the time provided and failure to comply with other covenants. Consequently, Red Mountain terminated all loan commitments and accelerated the payments including accrued interest, fees and other obligations, which are now due immediately. Also, Yuma received simultaneous written notice from Red Mountain that the restructuring agreement and related voting agreement were automatically terminated.
As disclosed in September 2019, YE Investment, an affiliate of Red Mountain, purchased all of Yuma’s outstanding senior secured bank indebtedness and related liabilities under the company’s senior credit facility. The credit facility was then modified to reduce the outstanding principal balance from approximately $32.8 million, plus accrued and unpaid interest and expenses, to approximately $1.4 million (the modified note). Yuma also entered into a restructuring and exchange agreement with Red Mountain and affiliates, which was to result in the exchange of the modified note for a new convertible note that would be convertible into Yuma common stock, and conversion of the company’s Series D Preferred Stock into Yuma common stock.
Finally, in December 2019, the parties entered into an amendment to the restructuring agreement and credit facility under which Red Mountain provided an additional two-year senior secured delayed-draw term loan for up to $2 million, maturing on September 30, 2022, from which Yuma has drawn $850,000 to date. The transactions contemplated by the restructuring agreement were subject to stockholder approval pursuant to NYSE American rules and requirements, and the restructuring agreement included a termination right in the event such stockholder approval was not received by December 31, 2019.
“Despite our efforts to remedy our financial distress and evaluate strategic alternatives over the past few months, we have not come to a mutually agreeable understanding with Red Mountain regarding the extension/modification of the restructuring agreement, modified note and related agreements,” Anthony C. Schnur, interim CEO and chief restructuring officer of Yuma, said. “We are disappointed that YE and Red Mountain, our senior lender and majority owner of our Series D Preferred stock and holder of approximately 10% of our outstanding common stock, have taken this action. Our ability to make timely interest payments has been hampered by the dramatic collapse in oil prices, certain well failures and economic uncertainty caused by the COVID-19 virus. The acceleration of all outstanding payments demanded by Red Mountain at this time will likely force the company to cease our business plan, sell assets or possibly take other remedial steps such as seeking bankruptcy protection.”
Yuma Energy is a Houston-based exploration and production company focused on acquiring, developing and exploring for oil and natural gas resources.
