Atlas Resource Partners LP filed for chapter 11 bankruptcy Wednesday evening after negotiating a plan to slash some $900 million in debt off its books.

Although the restructuring will substantially reduce the oil and gas producer's debt, its status as a partnership could leave its investors with a hefty tax bill.

Under the pre-negotiated plan, announced last week, the company's unit holders will receive no recovery and their ownership stakes will be canceled, Atlas said. As unit holders in a partnership, rather than shareholders in a corporation, these investors could also face a tax bill for the debt that Atlas cancels in chapter 11.

Atlas's proposed restructuring plan is a debt-for-equity swap with senior bondholders, 80% of which have formally signed on to the deal. The company filed for bankruptcy to execute the agreement.

Under the terms of the agreement, two sets of bondholders would exchange $668 million in debt for a 90% ownership stake in the restructured company.

Atlas's current revolving loan, under which the company owes more than $670 million, would be repaid through the liquidation of its hedge positions, and a new $410 million facility would be provided when Atlas exits bankruptcy.

The holders of $250 million in junior loan debt would receive the remaining 10% equity in Atlas in exchange for an interest-rate reduction.

Upon completion of the deal, Atlas's tax status will change to a traditional corporation and its name will be changed to Titan Energy.

Atlas Resources, based in Pittsburgh, filed for bankruptcy with the U.S. Bankruptcy Court in Manhattan, claiming assets in the range of $1 billion to $10 billion, with liabilities in the same range. The oil and gas producer has 14,000 producing wells in 17 states. It said in its most recent financial statement that "lower commodity prices have negatively impacted our revenues, earnings and cash flows. Sustained low commodity prices will have a material and adverse effect on our liquidity position."

Write to Stephanie Gleason at stephanie.gleason@wsj.com

(END) Dow Jones Newswires

July 28, 2016 00:55 ET (04:55 GMT)