FR Dixie Holdings Corp.

November 2, 2018

Oilfield services company, Dixie Electric LLC, and its parent, FR Dixie Holdings Corp., have filed for Chapter 11 bankruptcy in the District of Delaware with a prepackaged plan of reorganization that eliminates $300mm of funded debt via a debt for equity swap. The privately-held (First Reserve) Houston-based provider of electrical infrastructure materials and services to the energy industry (primarily in the Permian and Bakken basins) has a commitment in hand for $17.5mm of DIP financing to fund the business in BK and $30mm in exit term loans to fund the business upon its emergence from BK.

For the nine months ended September 30, 2018, the unaudited and consolidated financial statements of the Company reflected revenue of $95.0 million and a net loss of $24.5 million. Given approximately $300mm in debt, these numbers presented the company with some serious challenges. The company also blames its bankruptcy filing on “decreased drilling and well completion activity, tightness in the skilled labor market and unprofitable lumpsum contracts.”

The company’s bankruptcy papers include a commentary about the state of the post-downturn oil and gas market reflecting, not-so-surprisingly, (i) some discipline by oil and gas drillers and (ii) macro concerns about the labor market. The company notes:

Operators have become increasingly focused on service costs and have pushed for rate cuts and reduced overtime and fixed-priced work. The Company was also increasingly bidding against other firms for work, further putting pressure on margins. As the oil and gas market has recovered, operators have remained focused on costs and, while the Company has been pushing for rate increases, there is still less overtime work and more fixed-price work than existed prior to the downturn. In addition, the Company is experiencing higher labor rates and has not been able to fully offset those labor rate increases with the additional pricing increases.

Accordingly, the company has shut down business lines and stream-lined operations. The hope is that with a near-full deleveraging, it will be better positioned for the future. Given the support of its secured lenders and other parties in interest, the company appears headed in the right direction. The company seeks confirmation of its plan on December 13.

• Jurisdiction: D. of Delaware

• Capital Structure: $19.6mm revolver, $267.4mm TL (Wilmington Trust NA), $8mm unsecured loans    

• Company Professionals:

  • Legal: Simpson Thacher & Bartlett LLP (Elisha Graff, Kathrine McLendon, Edward Linden, David Baruch) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Sean Beach, Elizabeth Justison, Tara Pakrouh)

  • Financial Advisor: BDO USA LLP

  • Investment Banker: PJT Partners LP (Peter Laurinaitis, Joseph Fallon)

  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)

• Other Parties in Interest:

  • Ad Hoc Group of Prepetition Secured Lenders

    • Legal: Davis Polk & Wardwell LLP & (local) Morris Nichols Arsht & Tunnell LLP

    • Financial Advisor: Ankura Consulting Group

Updated 11/2 7:45am CT