Lilis Energy filed petitions under Chapter 11 of the United States Bankruptcy Code to initiate voluntary cases in the United States Bankruptcy Court for the Southern District of Texas, Houston Division.
Vinson & Elkins is serving as legal advisor, Barclays Capital is serving as investment banker and Opportune is serving as restructuring advisor to Lilis Energy.
The Chapter 11 petitions were filed in accordance with a restructuring support agreement entered into among Lilis Energy and certain of its subsidiaries, certain investment funds and entities affiliated with Värde Partners (Värde Funds), which collectively own all of the Lilis Energy’s outstanding preferred stock, a subordinated portion of the indebtedness outstanding under the Lilis Energy’s second amended and restated senior secured revolving credit agreement, a portion of the Lilis Energy’s common stock, and all other lenders under the credit agreement (the RBL lenders).
Under the restructuring agreement, Lilis Energy and its subsidiaries, the RBL lenders and the Värde Funds have agreed, subject to certain conditions set forth in the restructuring agreement, to support a restructuring of Lilis Energy and its subsidiaries under a Chapter 11 plan of reorganization to be proposed with terms set forth in the RSA. The plan, if consummated, is expected to reduce Lilis Energy’s funded debt obligations by more than $34.9 million and right-size Lilis Energy’s bank indebtedness for future operations.
The plan contemplated by the restructuring agreement further provides that shares of Lilis Energy’s common stock will be canceled for no consideration. Lilis Energy believes it is unlikely that the holders of shares of its common stock will receive any consideration for their shares under any plan approved by the court, regardless of whether such a plan contemplates terms consistent with or similar to those agreed upon in the restructuring agreement. Consummation of any restructuring plan will be subject to confirmation by the court and the satisfaction, or waiver by appropriate parties, of any conditions set forth in such plan and related transaction documents.
Lilis Energy expects to continue to operate in the ordinary course throughout the restructuring process without material disruption to vendors, suppliers and partners.
The reorganization plan is contingent upon the Värde Funds’ election to provide, on or before Aug. 17, an agreed equity commitment and provision of additional debtor-in-possession financing. In the event the Värde Funds elect not to provide DIP financing and to make the equity investment in Lilis Energy or the plan contemplated in the restructuring agreement is not otherwise pursued, the agreement provides that Lilis Energy will pursue an agreed sales process with respect to its assets. The restructuring agreement is also subject to termination by the RBL lenders and the Värde Funds in the event certain milestones in the reorganization process are not met.
“Like many companies in the oil and gas industry, we have been impacted by the severe downturn in commodity prices throughout the COVID-19 pandemic,” Joseph C. Daches, CEO, CFO and president of Lilis Energy, said. “While facing this challenging environment, we have worked diligently to explore a variety of alternatives to cut costs, improve our liquidity and address debt maturities. We are pleased to receive the continued support of our lenders and preferred shareholders and are confident that Lilis Energy can emerge from Chapter 11 better positioned to meet the challenges that have faced us.”
Lilis Energy also received a commitment from its bank lenders under its credit agreement to provide up to $15 million in DIP financing. The company anticipates up to $5 million will be available on an interim basis. With the company’s usual operating cash flows, these financings are expected to provide sufficient liquidity for the company to continue to operate in the ordinary course through the restructuring process.
In addition to the filing, on June 27, 2020, Markus Specks resigned as a director of Lilis Energy. Under their rights as holders of the company’s outstanding preferred stock, the Värde Funds named Nicholas Winter, a managing director of Värde Partners, the new designated director.
Lilis Energy is a Fort Worth, TX-based independent oil and gas exploration and production company.
