⛽️New Chapter 11 Bankruptcy Filing - Nine Point Energy Holdings Inc.⛽️

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Nine Point Energy Holdings Inc.

Colorado-based Nine Point Energy Holdings Inc. (along with three affiliates, the “debtors”) is and independent oil and gas exploration and production company focused on the Williston Basin in North Dakota and Montana. It is the successor to Triangle USA Petroleum Corporation, which filed for chapter 11 bankruptcy in June 2016 and confirmed a plan in March 2017. Four years later, it’s back in bankruptcy court. 😬

Followers of E&P bankruptcies have become accustomed to disputes relating to E&P companies and their midstream gathering, transportation and processing providers. Here, Caliber Midstream Partners LP was the debtors’ largest midstream services provider — “was” being the operative word after the debtors terminated the long-term midstream services agreements on the eve of bankruptcy. The story, however, doesn’t end there.

The debtors are willing to enter into a new arrangement with Caliber going forward. It’s unclear how the new arrangement might differ from the existing arrangement because redaction, redaction, redaction. The economic terms of the contract have not been disclosed. 🤔

And so here we are with another potential “running with the land” scenario. If you’re unfamiliar with what this is, you clearly haven’t been paying attention to E&P bankruptcy cases. Just Google it and you’ll pull up probably 8928394829248929 law firm articles on the topic. As this will be a major driver in the case, it probably makes sense to refresh your recollection.

Why are the debtors in bankruptcy? All of the usual reasons, e.g., the big drop in oil prices thanks to COVID-19 and Russia/OPEC. Nothing really new there.

So what does this filing achieve? For starters, it will give the debtors an opportunity to address the Caliber contracts. Moreover, it will avail the debtors of a DIP facility from their pre-petition lenders in the amount of ~$72mm — $18mm in new money and $54mm on a rollup basis (exclusive of an additional $16.1mm roll-up to account for pre-petition secured swap obligations)(8% interest with 2% commitment fee). Finally, the pre-petition-cum-DIP-lenders have agreed to serve as the stalking horse purchaser of the debtors’ assets with a credit bid floor of $250mm.

Date: March 15, 2021

Jurisdiction: D. of Delaware (Judge Walrath)

Capital Structure: $256.9mm credit facility, $16.1mm swap obligations

Company Professionals:

  • Legal: Latham & Watkins LLP (Richard Levy, Caroline Reckler, Jonathan Gordon, George Davis, Nacif Taousse, Alistair Fatheazam, Jonathan Weichselbaum, Andrew Sorkin, Heather Waller, Amanda Rose Stanzione, Elizabeth Morris, Sohom Datta) & Young Conaway Stargatt & Taylor LLP (Michael Nestor, Kara Hammond Coyle, Ashley Jacobs, Jacob Morton)

  • Board of Directors: Patrick Bartels Jr., Dominic Spencer, Frederic Brace, Gary Begeman, Alan Dawes

  • Financial Advisor: AlixPartners LLP (John Castellano)

  • Investment Banker: Perella Weinberg Partners LP (John Cesarz)

  • Claims Agent: Stretto (Click here for free docket access)

Other Parties in Interest:

  • Pre-petition & DIP Agent: AB Private Credit Investors LLC

    • Legal: Proskauer Rose LLP (Charles Dale, David Hillman, Michael Mervis, Megan Volin, Paul Possinger, Jordan Sazant) & Landis Rath & Cobb LLP (Adam Landis, Kerri Mumford, Matthew Pierce)

  • Ad Hoc Group of Equityholders: Shenkman Capital Management, JP Morgan Securities LLC, Canyon Capital Advisors LLC, Chambers Energy Capital

    • Legal: Willkie Farr & Gallagher LLP (Jeffrey Pawlitz, Matthew Dunn, Mark Stancil) & Richards Layton & Finger PA (John Knight, Amanda Steele, David Queroli)

  • Midstream Counterparty: Caliber Measurement Services LLC, Caliber Midstream Fresh Water Partners LLC, and Caliber North Dakota LLC

    • Legal: Weil Gotshal & Manges LLP (Alfredo Perez, Brenda Funk, Tristan Sierra, Edward Soto, Lauren Alexander) & Morris Nichols Arsht & Tunnell LLP (Curtis Miller, Taylor Haga, Nader Amer)

⛽️New Chapter 11 Filing - Legacy Reserves Inc.⛽️

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Legacy Reserves Inc.

June 18, 2019

Even at 95 years old, you can’t get one past Charlie Munger. #Legend.

The Permian Basin in West Texas is where it’s at in the world of oil and gas exploration and production. Per Wikipedia:

As of 2018, the Permian Basin has produced more than 33 billion barrels of oil, along with 118 trillion cubic feet of natural gas. This production accounts for 20% of US crude oil production and 7% of US dry natural gas production. While the production was thought to have peaked in the early 1970s, new technologies for oil extraction, such as hydraulic fracturing and horizontal drilling have increased production dramatically. Estimates from the Energy Information Administration have predicted that proven reserves in the Permian Basin still hold 5 billion barrels of oil and approximately 19 trillion cubic feet of natural gas.

oil gushing.gif

And it may be even more prolific than originally thought. Norwegian research firm Rystad Energy recently issued a report indicating that Permian projected output was already above 4.5mm barrels a day in May with volumes exceeding 5mm barrels in June. This staggering level of production is pushing total U.S. oil production to approximately 12.5mm barrels per day in May. That means the Permian now accounts for 36% of US crude oil production — a significant increase over 2018. Normalized across 365 days, that would be a 1.64 billion barrel run rate. This is despite (a) rigs coming offline in the Permian and (b) natural gas flaring and venting reaching all-time highs in Q1 ‘19 due to a lack of pipelines. Come again? That’s right. The Permian is producing in quantities larger than pipelines can accommodate. Per Reuters:

Producers burned or vented 661 million cubic feet per day (mmcfd) in the Permian Basin of West Texas and eastern New Mexico, the field that has driven the U.S. to record oil production, according to a new report from Rystad Energy.

The Permian’s first-quarter flaring and venting level more than doubles the production of the U.S. Gulf of Mexico’s most productive gas facility, Royal Dutch Shell’s Mars-Ursa complex, which produces about 260 to 270 mmcfd of gas.

The Permian isn’t alone in this, however. The Bakken shale field in North Dakota is also flaring at a high level. More from Reuters:

Together, the two oil fields on a yearly basis are burning and venting more than the gas demand in countries that include Hungary, Israel, Azerbaijan, Colombia and Romania, according to the report.

All of which brings us to Legacy Reserves Inc. ($LGCY). Despite the midstream challenges, one could be forgiven for thinking that any operators engaged in E&P in the Permian might be insulated from commodity price declines and other macro headwinds. That position, however, would be wrong.

Legacy is a publicly-traded energy company engaged in the acquisition, development, production of oil and nat gas properties; its primary operations are in the Permian Basin (its largest operating region, historically), East Texas, and in the Rocky Mountain and Mid-Continent regions. While some of these basins may produce gobs of oil and gas, acquisition and production is nevertheless a HIGHLY capital intensive endeavor. And, here, like with many other E&P companies that have recently made their way into the bankruptcy bin, “significant capital” translates to “significant debt.”

Per the Company:

Like similar companies in this industry, the Company’s oil and natural gas operations, including their exploration, drilling, and production operations, are capital-intensive activities that require access to significant amounts of capital.  An oil price environment that has not recovered from the downturn seen in mid-2014 and the Company’s limited access to new capital have adversely affected the Company’s business. The Company further had liquidity constraints through borrowing base redeterminations under the Prepetition RBL Credit Agreement, as well as an inability to refinance or extend the maturity of the Prepetition RBL Credit Agreement beyond May 31, 2019.

This is the company’s capital structure:

Legacy Cap Stack.png

The company made two acquisitions in mid-2015 costing over $540mm. These acquisitions proved to be ill-timed given the longer-than-expected downturn in oil and gas. Per the Company:

In hindsight, despite the GP Board’s and management’s favorable view of the potential future opportunities afforded by these acquisitions and the high-caliber employees hired by the Company in connection therewith, these two acquisitions consumed disproportionately large amounts of the Company’s liquidity during a difficult industry period.

WHOOPS. It’s a good thing there were no public investors in this thing who were in it for the high yield and favorable tax treatment.*

Yet, the company was able to avoid a prior bankruptcy when various other E&P companies were falling like flies. Why was that? Insert the “drillco” structure here: the company entered into a development agreement with private equity firm TPG Special Situations Partners to drill, baby, drill (as opposed to acquire). What’s a drillco structure? Quite simply, the PE firm provided capital in return for a wellbore interest in the wells that it capitalized. Once TPG clears a specified IRR in relation to any specific well, any remaining proceeds revert to the operator. This structure — along with efforts to delever through out of court exchanges of debt — provided the company with much-needed runway during a rough macro patch.

It didn’t last, however. Liquidity continued to be a pervasive problem and it became abundantly clear that the company required a holistic solution to its balance sheet. That’s what this filing will achieve: this chapter 11 case is a financial restructuring backed by a Restructuring Support Agreement agreed to by nearly the entirety of the capital structure — down through the unsecured notes. Per the Company:

The Global RSA contemplates $256.3 million in backstopped equity commitments, $500.0 million in committed exit financing from the existing RBL Lenders, the equitization of approximately $815.8 million of prepetition debt, and payment in full of the Debtors’ general unsecured creditors.

Said another way, the Permian holds far too much promise for parties in interest to walk away from it without maintaining optionality for the future.

*Investors got burned multiple times along the way here. How did management do? Here is one view (view thread: it’s precious):

😬

  • Jurisdiction: S.D. of Texas (Judge Isgur)

  • Capital Structure: See above.

  • Professionals:

    • Legal: Sidley Austin LLP (Duston McFaul, Charles Persons, Michael Fishel, Maegan Quejada, James Conlan, Bojan Guzina, Andrew O’Neill, Allison Ross Stromberg)

    • Financial Advisor: Alvarez & Marsal LLC (Seth Bullock, Mark Rajcevich)

    • Investment Banker: Perella Weinberg Partners (Kevin Cofsky)

    • Claims Agent: KCC (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Official Committee of Unsecured Creditors (Wilmington Trust NA, Dalton Investments LLC, Paul Drueke, John Dinkel, Nicholas Mumford)

    • GSO Capital Partners LP

      • Legal: Latham & Watkins LLP (George Davis, Adam Goldberg, Christopher Harris, Zachary Proulx, Brett Neve, Julian Bulaon) & (local) Porter Hedges LLP (John Higgins, Eric English, M. Shane Johnson)

    • DIP Lender: Wells Fargo Bank NA

      • Legal: Orrick LLP (Raniero D’Aversa, Laura Metzger)

    • Prepetition Term Agent: Cortland Capital Market Services LLC

      • Legal: Arnold & Porter Kaye Scholer LLP (Gerardo Mijares-Shafai, Seth Kleinman)

    • Indenture Trustee: Wilmington Trust NA

      • Legal: Pryor Cashman (Seth Lieberman, Patrick Sibley, Andrew Richmond)

    • Ad Hoc Group of Senior Noteholders (Canyon Capital Advisors LLC, DoubleLine Income Solutions Fund, J.H. Lane Partners Master Fund LP, JCG 2016 Holdings LP, The John C. Goff 2010 Family Trust, John C. Goff SEP-IRA, Cuerno Largo Partners LP, MGA insurance Company Inc., Pingora Partners LLC)

      • Legal: Davis Polk & Wardwell LLP (Brian Resnick, Stephen Piraino, Michael Pera) & (local) Rapp & Krock PC (Henry Flores)

Updated 7/7/19 #188

New Chapter 11 Bankruptcy - Walter Investment Management Corp.

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Walter Investment Management Corp. 

  • 11/30/17 Recap: Mortgage banking firm focused primarily on the servicing and origination of loans, including forward and reverse loans, has filed a much-anticipated prepackaged bankruptcy with the intention of shedding nearly $800mm of debt from its balance sheet. The company originates "conventional conforming loans eligible for securitization by government-sponsored enterprises, such as Fannie Mae and Freddie Mac, or eligible for guarantees by government agencies, such as Ginnie Mae MBSs." If that was painful reading, imagine how the lawyers felt drafting that. Even more painful is understanding that this bankruptcy is directly attributable to decisions the company made in the aftermath of the financial crisis. From 2010 through 2015, the company went on a debt-ridden acquisition spree (including once bankrupt Residential Capital LLC) which just goes to show that, while one's crisis is another's opportunity, one's crisis could be one's crisis. With this deleveraging transaction, the company hopes to be more competitive in the market going forward.

  • Jurisdiction: S.D. of New York (Judge Garrity)

  • Capital Structure: $100mm '18 RCF, $1.4b '20 TL (Credit Suisse AG), $540mm 7.875% '21 senior unsecured notes (Wilmington Savings Fund Society FSB), $242mm '19 senior subordinated convertible notes (Wells Fargo Bank NA)(public equity: $WAC)

  • Company Professionals:

    • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Matthew Barr, Sunny Singh)

    • Financial Advisor: Alvarez & Marsal North America LLC (David Coles)

    • Investment Banker: Houlihan Lokey Capital Inc. (Reid Snellenbarger, Jeffrey Levine, Jeffrey Lewis, James Page, Daniel Martin, Derek Kuns)

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

  • Other Parties in Interest:

    • Administrative Agent: Credit Suisse AG

      • Legal: Davis Polk & Wardwell LLP (Brian Resnick, Michelle McGreal)

    • Consenting Term Lenders (Carlson Capital LP, TAO Fund LLC, Credit Suisse Asset Management LLC, Marathon Asset Management LP, Nuveen, Symphony Asset Management LLC, Eaton Vance Management)

      • Legal: Kirkland & Ellis LLP (Patrick Nash, Gregory Pesce)

      • Financial Advisor: FTI Consulting Inc.

    • Consenting Senior Noteholders (Canyon Capital Advisors LLC, CQS UK LLP, Deer Park Road Management Company LP, Lion Point Capital LP, Oaktree Capital Management LP, Omega Advisors Inc.)

      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Gregory Bray, Haig Maghakian, Rachel Franzoia)

      • Financial Advisor: Moelis & Co.

    • Prepetition Indenture Trustee: Wilmington Savings Fund Society FSB

      • Legal: Pryor Cashman LLP (Patrick Sibley, Seth Lieverman, Matthew Silverman)

    • Prepetition Convertible Notes Indenture Trustee: Wells Fargo Bank NA

      • Legal: Thompson Hine LLP (Curtis Tuggle)

    • Administrative Agent for DIP Warehouse Facilities: Credit Suisse First Boston Mortgage Capital LLC

      • Legal: Alston & Bird LLP (Gerard Catalanello, Karen Gelernt, James Vincequerra)

    • Fannie Mae

      • Legal: O'Melveny & Myers LLP (Darren Patrick, Steve Warren, Jennifer Taylor)

    • Freddie Mac

      • Legal: McKool Smith (Paul Moak, Kyle Lonergan)

First Day Declaration

First Day Declaration

Updated 11/30/17 10:05 CT

New Filing - Commonwealth of Puerto Rico

Commonwealth of Puerto Rico & Puerto Rico Sales Tax Financing Corporation ("COFINA")

  • 5/3/17 Recap: The Commonwealth of Puerto Rico filed a petition for relief under Title III of the the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"). Much has been written on this situation and so we're going to keep this brief. We're also going to shed the snark. Why? Well, because this is truly a sad story. GNP in Puerto Rico has declined over 14% in the last decade. The unemployment rate is 12.1% as of 10/16. The labor participation rate plummeted to 40%. The population has declined by 10% over the last decade. 46.1% of PR's residents live below the federal poverty level: the national average is 14.7% and Detroit's poverty level at the time of filing for Chapter 9 was 36%. Brutal. All in, the Commonwealth has $74 billion of bond debt and $48 billion of unfunded pension liabilities. A total dumpster fire.
  • Jurisdiction: United States District Court for the District of Puerto Rico
  • Capital Structure:

 

  • Professionals:
    • Counsel to the Oversight Board: Proskauer Rose LLP (Martin Bienenstock, Scott Rutsky, Philip Abelson, Ehud Barak, Maja Zerjal, Timothy Mungovan, Steven Ratner, Paul Possinger) & O'Neill & Borges LLC (Hermann Bauer)
    • Strategic Consultant to the Oversight Board: McKinsey & Co.
    • Municipal Investment Banker to the Oversight Board: Citigroup Global Markets
    • Financial Advisor to the Oversight Board: Ernst & Young LLP
    • Counsel to the Puerto Rico Tax Agency and Financial Advisory Authority: O'Melveny & Myers LLP (John Rapisardi, Suzzanne Uhland, Peter Friedman)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Ad Hoc Retiree Committee
      • Legal: Bennazar Garcia & Milian CSP (A.J. Bennazar-Zequeira) & Clark Hill PLC (Robert Gordon, Shannon Deeby, Jennifer Green)
    • National Public Finance Guarantee Corporation
      • Legal: Weil (Marcia Goldstein, Kelly DiBlasi, Gabriel Morgan)
    • Ambac Assurance Corporation
      • Legal: Milbank Tweed & McCloy LLP (Dennis Dunne, Andrew Leblanc, Atara Miller)
    • UBS Family of Funds
      • Legal: White & Case LLP (John Cunningham)
    • Oppenheimer Funds
      • Legal: Kramer Levin Naftalis & Frankel LLP (Thomas Mayer, Amy Caton, Douglas Buckley, David Blabey Jr., Phillip Bentley)
    • American Federation of State, County and Municipal Employees
      • Legal: Saul Ewing LLP (Dipesh Patel, Sharon Levine)
    • The Employees Retirement System of the Government of the Commonwealth of Puerto Rico
      • Legal: DLA Piper LLP (Richard Chesley, Rachel Albanese)
    • Goldman Sachs Asset Management LP
      • Legal: McDermott Will & Emery LLP (James Kapp, Megan Thibert-Ind, William Smith)
    • Trustee: Bank of New York Mellon 
      • Legal: Reed Smith LLP (Luke Sizemore, Eric Schaffer, Kurt Gwynne)

Updated 5/11/17

From the Commonwealth's petition.

From the Commonwealth's petition.