HOUSTON, Oct. 25, 2016 /PRNewswire/ -- Key Energy
Services, Inc. ("Key") and certain of its domestic subsidiaries
(collectively, the "Debtors") filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy
Code on October 24, 2016 in
the United States Bankruptcy Court
for the District of Delaware (the
"Bankruptcy Court"), pursuant to the terms of the previously
disclosed plan support agreement (the "Plan Support Agreement")
among Key, Platinum Equity and certain other holders of its 6.75%
Senior Notes due 2021 ("Senior Notes"), collectively holding more
than 89% of its outstanding Senior Notes, and certain lenders
holding more than 87% of the principal amount of loans outstanding
under Key's Term Loan Credit Agreement dated June 1, 2015 ("Term Loan"), that contemplates the
reorganization of the Debtors pursuant to a prepackaged plan of
reorganization (the "Plan"). In accordance with the Plan
Support Agreement, Key previously commenced a solicitation for
acceptance of the Plan, which was accepted by voting holders of
99.89% in principal amount and 93.88% in number of Key's Senior
Notes and voting holders of 100% in principal amount and 100% in
number of loans under Key's Term Loan, constituting the requisite
number of voting holders of Key's Senior Notes and term loans.
The Debtors filed various "first day" motions with the
Bankruptcy Court seeking approval of relief that allows the Debtors
to continue to operate in the ordinary course of
business. On October 25,
2016, the Bankruptcy Court held a hearing to consider such
motions, and the Bankruptcy Court granted all "first day"
motions. The relief granted allows the Debtors to pay
their employees, vendors and trade creditors in full in the
ordinary course of business and to maintain their customer-related
programs and policies. The Bankruptcy Court has scheduled a
confirmation hearing for December 6,
2016 to consider entry of an order confirming the Plan, and
expect to emerge promptly thereafter.
Platinum Equity, a Los
Angeles-based global investment firm with a unique focus on
operations and extensive experience helping businesses in
transition, as holder of a majority of the Company's Senior Notes,
will become Key's largest shareholder upon consummation of the
Plan.
The Debtors will continue to operate their businesses in the
ordinary course while the Chapter 11 cases are pending. Upon
completion of the restructuring, reorganized Key will remain a
publicly traded company.
Robert Drummond, Key's President
and Chief Executive Officer, commented, "The filing of our
prepackaged bankruptcy cases with the Bankruptcy Court is an
important milestone in the process of restructuring Key to
significantly reduce the Company's debt burden and to position the
Company to take advantage of opportunities that emerge as the
market recovers. Importantly, this prepackaged Plan will not
interrupt our day-to-day operations and will allow Key to continue
to deliver a high level of service to our customers in a safe
manner and to pay our employees and vendors on a timely basis."
Platinum Equity Partner Jacob Kotzubei said he is pleased that
Key Energy successfully obtained overwhelming support for the Plan
from its creditors and the Bankruptcy Court relief needed to allow
Key to continue to operate in the ordinary course while in
bankruptcy. "This is a critical step in Key's proposed
restructuring that will allow the company to emerge as a stable,
well-capitalized business," said Mr. Kotzubei. "We continue to
believe Key is an ideal platform for growth and consolidation and
we look forward to working with Robert and the management team to
help the business thrive."
The principal components of the Plan include:
- Replacing Key's existing $100
million asset-based revolving credit facility with a new ABL
facility.
- Reducing Key's Term Loan obligations to $250 million.
- Exchanging 100% of Key's existing Senior Notes for 7.5 million
shares of reorganized Key plus rights to acquire additional shares
of reorganized Key.
- Cancelling all of Key's existing common stock in exchange of
815,891shares of reorganized Key plus rights and warrants to
acquire additional shares of reorganized Key.
Additionally, contemporaneously with the solicitation, Key
conducted an offering of subscription rights to certain qualifying
holders of Key's Senior Notes and certain qualifying Key equity
holders to purchase shares of reorganized Key common stock.
The proceeds of the rights offering – which will range between
$85 million and $110 million – will
permit Key to pay certain claims under the Plan and will also
provide liquidity to Key when it emerges from bankruptcy.
Key is represented in its restructuring by Sidley Austin LLP,
and Platinum Equity is represented by Sullivan & Cromwell
LLP.
Cautionary Note regarding Forward-Looking
Statements
This press release contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements that are not historical in nature or that
relate to future events and conditions are, or may be deemed to be,
forward-looking statements. These statements are only predictions
and are subject to substantial risks and uncertainties and are not
guarantees of performance. Future actions, events and conditions
and future results of operations may differ materially from those
expressed in these statements.
Important factors that may affect Key's expectations, estimates
or projections include, but are not limited to, the following:
risks associated with Key's reorganization; the ability of Key to
obtain confirmation of the Plan from the Bankruptcy Court and/or
meet all of the conditions precedent therein necessary to
effectuate the Plan; conditions in the oil and natural gas
industry, especially oil and natural gas prices and capital
expenditures by oil and natural gas companies; volatility in oil
and natural gas prices; Key's ability to implement price increases
or maintain pricing on its core services; industry capacity;
increased labor costs or unavailability of skilled workers; asset
impairments or other charges; the periodic low demand for Key's
services and resulting operating losses and negative cash flows;
Key's highly competitive industry as well as operating risks, which
are primarily self-insured, and the possibility that its insurance
may not be adequate to cover all of its losses or liabilities; the
economic, political and social instability and risks of doing
business in certain foreign countries; significant costs and
potential liabilities resulting from compliance with applicable
laws; Key's historically high employee turnover rate and its
ability to replace or add workers, including executive officers;
Key's ability to incur debt or long- term lease obligations; Key's
ability to implement technological developments and enhancements;
significant costs and liabilities resulting from environmental,
health and safety laws and regulations, including those relating to
hydraulic fracturing; severe weather impacts on Key's business;
Key's ability to successfully identify, make and integrate
acquisitions and its ability to finance future growth of its
operations or future acquisitions; the loss of one or more of Key's
larger customers; the impact of compliance with climate change
legislation or initiatives; Key's ability to generate sufficient
cash flow to meet debt service obligations; the amount of Key's
debt and the limitations imposed by the covenants in the
agreements governing its debt, including its ability to comply with
covenants under its current debt agreements; an increase in Key's
debt service obligations due to variable rate indebtedness; Key's
inability to achieve its financial, capital expenditure and
operational projections, including quarterly and annual projections
of revenue and/or operating income and its inaccurate assessment of
future activity levels, customer demand, and pricing stability
which may not materialize (whether for Key as a whole or for
geographic regions and/or business segments individually); Key's
ability to execute its plans to withdraw from international markets
outside North America; Key's
ability to achieve the benefits expected from acquisition and
disposition transactions; Key's ability to respond to changing or
declining market conditions, including Key's ability to reduce the
costs of labor, fuel, equipment and supplies employed and used in
its businesses; Key's ability to maintain sufficient liquidity;
adverse impact of litigation; and other factors affecting Key's
business described in "Item 1A. Risk Factors" in its Annual Report
on Form 10-K for the year ended December 31, 2015
and its other filings with the SEC and in Article XI of the
Disclosure Statement.
About Key Energy Services
Key Energy
Services is the largest onshore, rig-based well servicing
contractor based on the number of rigs owned. Key provides a
complete range of well intervention services and has operations in
all major onshore oil and gas producing regions of the
continental United States and internationally
in Russia.
Contact:
West Gotcher, Investor Relations
713-757-5539
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SOURCE Key Energy Services, Inc.