Item 1.01
Entry Into a Material Definitive Agreement
As previously disclosed, Halcón Resources Corporation (
Halcón
) has been involved in discussions with certain of its stakeholders in respect of a possible restructuring of the indebtedness and capitalization of Halcón and certain of its subsidiaries (collectively, the
Company
). On June 9, 2016, the Company entered into a restructuring support agreement (the
RSA
) with (i) holders representing 80% of the $1.02 billion in aggregate principal amount outstanding on the Companys 13% senior secured notes due 2022 (the
Third Lien Holders
), (ii) holders representing 57% of the $650 million in aggregate principal amount outstanding on the Companys 8.875% senior unsecured notes due 2021, 9.25% senior unsecured notes due 2022 and 9.75% senior unsecured notes due 2020 (collectively, the
Unsecured Noteholders
), (iii) the holder of 100% of the $290 million in aggregate principal amount outstanding on the Companys 8% senior unsecured convertible note due 2020 (the
Convertible Noteholder
), and (iv) holders of 63% of the outstanding shares of the Companys 5.75% series A convertible perpetual preferred stock (the
Preferred Holders
and together with the Third Lien Holders, Unsecured Noteholders and Convertible Noteholder, the
Stakeholders
), to support a restructuring on the terms of a plan of reorganization as described therein. The RSA contemplates that the Company will file for voluntary relief under chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court in the District of Delaware on or before August 2, 2016 if certain approval levels are attained from the Stakeholders in favor of the restructuring plan in accordance with the term sheet for a plan of reorganization annexed to the RSA (the
Term Sheet
). The description below of the RSA and annexed Term Sheet is qualified by reference to the full text of such agreement, copies of which are filed herewith as
Exhibits 10.1
and
10.2
respectively and are incorporated herein by reference.
Pursuant to the terms of the RSA and the Term Sheet, Stakeholders and other interest holders will receive the following treatment:
·
The Company will obtain a credit facility pursuant to an amendment or an amendment and restatement of its existing Revolving Credit Agreement (or any replacement financing) in an aggregate principal amount of not less than $600,000,000 (the
Amended Revolving Credit Agreement
), which Amended Revolving Credit Agreement shall be (a) in form and substance reasonably satisfactory to the Requisite Unsecured Noteholders (as defined in the RSA), and (b) in form and substance satisfactory to the Requisite Third Lien Noteholders (as defined in the RSA).
·
The Companys Second Lien Notes (consisting of $700 million in aggregate principal amount outstanding of 8.625% senior secured notes due 2020 and $113 million in aggregate principal amount outstanding of 12% senior secured notes due 2022) shall be reinstated.
·
Third Lien Holders will receive their pro rata share of 76.5% of the common stock of reorganized Halcón, together with a cash payment of $33.8 million, and accrued and unpaid interest on their notes through May 15, 2016.
·
Unsecured Noteholders will receive their pro rata share of 15.5% of the common stock of reorganized Halcón, together with a cash payment of $37.6 million and warrants to purchase 4% of the pro forma equity of reorganized Halcón with a four year term and an exercise price based on an equity value of $1.33 billion, and accrued and unpaid interest on their notes through May 15, 2016.
·
The Convertible Noteholder will receive 4% of the common stock of reorganized Halcón, together with a cash payment of $15.0 million and warrants to purchase 1% of the pro forma equity of reorganized Halcón with a four year term and an exercise price based on an equity value of $1.33 billion.
·
Preferred Holders will receive their pro rata share of $11.1 million in cash.
·
Existing common stockholders will receive their pro rata share of 4% of the common stock of reorganized Halcón.
·
General unsecured claims are unimpaired.
Each of the foregoing percentages is subject to dilution from the exercise of the new warrants described above and a management incentive plan.
The RSA contains certain covenants on the part of the Company and the Stakeholders, including that the Stakeholders vote in favor of the Plan (as defined in the RSA) and otherwise facilitate the restructuring transaction. The RSA also provides for termination by each party upon the occurrence of certain events, including without limitation the failure of the Company to achieve certain milestones.
2