Seventy Seven Energy Files for Bankruptcy
June 07 2016 - 2:30PM
Dow Jones News
Oil field services company Seventy Seven Energy Inc. filed for
bankruptcy protection Tuesday with a plan to eliminate more than $1
billion in debt and hand control of the business to its
bondholders.
The Oklahoma City company, spun off from Chesapeake Energy Corp.
in 2014, is the latest victim of the downturn in oil and natural
gas prices, which has claimed dozens of companies in the oil patch
since the start of last year.
The company filed for protection in U.S. Bankruptcy Court in
Wilmington, Del., with a "prepackaged" chapter 11 plan after
garnering support from its creditors to support the restructuring
proposal. Such preapproved plans are becoming increasingly popular
with companies and investors, who want to minimize the time and
expense of chapter 11 balance sheet restructuring.
"The successful completion of the solicitation process and
today's filing represent the next step forward in our financial
restructuring," said Jerry Winchester, the company's chief
executive.
Under the terms of the previously floated plan, which eliminates
$1.1 billion, the company's 2019 unsecured bondholders will receive
at least 96.75% equity in the restructured company in exchange for
forgiveness of the $650 million they're owed. A second group of
bondholders are slated to get a 3.25% equity stake plus warrants
for 15% of the new common stock if they vote to support the
plan.
The company's term-loan lenders will receive a 2% payout of
their loan upfront and a better collateral package securing the
remaining loan, which will be carried over. The incremental
term-loan lenders will be paid at least $15 million upfront, and
the remaining $84 million balance of its loan will remain in
place.
Additionally, current equity holders will receive warrants for
20% of new common stock if all the debtholders vote for the
plan.
Seventy Seven said its trade creditors, suppliers and
contractors will be paid in the ordinary course of business. The
company's lenders, led by Wells Fargo, have agreed to provide $100
million in financing to fund the chapter 11 case, which Seventy
Seven hopes to have completed within 60 days.
Seventy Seven is an oil-field servicer that provides drilling,
hydraulic fracturing and oil field rental services to exploration
and production companies. The company had cited the shakeout in the
oil patch for its need to restructure more than $1.7 billion in
debt.
It first raised the possibility of bankruptcy in a February
regulatory filing after hiring advisers from Lazard to help it
restructure its business.
The law firm Baker Botts is handling the chapter 11 matter, and
the company has hired Alvarez & Marsal as its restructuring
adviser. The case number is 16-11409 and Judge Laurie Selber
Silverstein has been assigned the case.
Stephanie Gleason contributed to this article.
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
(END) Dow Jones Newswires
June 07, 2016 14:15 ET (18:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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