⛽️New Chapter 11 Bankruptcy Filing - Rosehill Resources Inc. ($ROSE)⛽️

Rosehill Resources Inc. ($ROSE)

July 27, 2020

Stop us if you’ve heard this before: Rosehill Resources Inc. ($ROSE), a Texas-based independent E&P company focused, via a fellow-debtor operating company, Rosehill Operating Company LLC (“ROC”), on the Permian Basin (and, more specifically, the Delaware Basin), filed for bankruptcy because of the usual suspects that literally every oil and gas company blames. Seriously, it’s like everyone is just copying and pasting Arya Stark’s hitlist at this point: “Vladimir Putin, Mohammad Bin Salman Al Saud, COVID-19, the competition, too much debt, etc. etc.” Never mind: we’ll stop ourselves. We’ve all heard this before. Many. MANY. Times.

Speaking of the debt, here is what the capital structure looks like and this is what will happen to it pursuant to the prepackaged plan of reorganization that’s already on file:

©️PETITION LLC

That should be pretty self-explanatory but there are a few things to highlight:

• The $235mm exit RBL actually represents a decreased borrowing base. The original RCF had a maximum commitment of $500mm with a most recent borrowing base of $340mm. That borrowing base amount created a deficiency/liability the company struggled — when coupled with service obligations related to the RCF, secured notes and preferred stock — to make.

• The DIP will run at 8% PIK which is better than the 10% cash pay under the secured notes.

In terms of operations, Rosehill operates or owns working interests in 133 oil and gas wells of which 128 are producing or are capable of production. And here’s what that production looks like:

Is that interesting? Not particularly. We include only to demonstrate that we’re not the only ones who are capable of highly unfortunate and irritating typographical errors. More interesting is the fact that Rosehill earned $302.3mm in revenue in ‘19 against $239mm of operating expense. Revenue was basically flat from ‘18 whereas the company’s operating expense increased. On the plus side, the company had some favorable hedge agreements in place which, upon monetization, resulted in $87.6mm in proceeds that the company ultimately used to paydown its RCF immediately prior to the filing. Actually, who are we kidding? That’s not particularly interesting either.

Given how boring this bankruptcy is, the last thing we’ll mention — again because we and the entire world of finance seems to be obsessed with the topic — is that the company emanated out of … wait for it … wait for it … a SPAC!! While the company was originally incorporated in 2015 as a SPAC under the name KLR Energy Acquisition Corporation — sponsored by the KLR Group’s Edward Kovalik, Stephen Lee and Reid Rubinstein — the business corporation that ultimately became Rosehill Resources Inc. occurred in April 2017.

The rest, as they say, is now history. Perhaps we should start taking a running tally: new SPAC IPOs vs. old SPACs that have now filed for chapter 11 bankruptcy!

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

• Capital Structure: $226.5mm RCF, $106.1mm second lien secured notes,

• Professionals:

  • Legal: Gibson Dunn & Crutcher LLP (David Feldman, Matthew Kelsey, Dylan Cassidy, Hillary Holmes, Shalla Prichard, Michael Neumeister, Ashtyn Hemendinger) & Haynes and Boone LLP (Kelli Norfleet, Arsalan Muhammad)

  • Financial Advisor: Opportune LLP

  • Investment Banker: Jefferies Group LLC (Jeffrey Finger)

  • Claims Agent: Epiq Corporate Restructuring LLC (*click on the link above for free docket access)

• Other Parties in Interest:

  • Admin Agent: JPMorgan Chase Bank NA

    • Legal: White & Case LLP (Mark Holmes) & Bracewell LLP (Jason Cohen)

  • Admin Agent to the Secured Note Purchase Agreement: US Bank NA

    • Legal: Shipman & Goodwin LLP (Kimberly Cohen, Robert Borden)

  • Second Lien Noteholders & Series B Preferred Stockholderes & Majority DIP Lenders: EIG Management Company LLC

    • Legal: Kirkland & Ellis LLP (Chad Husnick, Christopher Koenig, Mary Kogut Brawley) & Zack A. Clement PLLC (Zach Clement)

  • Tax Receivable Claimant & Preferred and Common Stockholder: Tema Oil & Gas Company

    • Legal: McDermott Will & Emery LLP (James Kapp III, Brandon White, Nathan Coco, Fred Levenson, Michael Boykins)
      
      
      

🌑New Chapter 11 Bankruptcy Filing - Foresight Energy Inc.🌑

Foresight Energy Inc.

March 10, 2020

Are there any coal companies left out there that HAVEN’T filed for bankruptcy at this point?

As expected by everyone, thermal coal producer Foresight Energy LP and numerous affiliates (the “debtors”) filed a “prearranged” bankruptcy on Tuesday in the District of Missouri.

Observers have long recognized that this chapter 11 filing was a fait accompli. The debtors are inextricably linked to Murray Energy, which filed late last year. The difference here, though, is that Foresight’s capital structure is FAR less complex and, because of that among other reasons, the debtors had the luxury of a bit more time to sit back and wait and see how the Murray bankruptcy played out. The debtors also had the luxury of taking their time — which is not to say that things haven’t been a sprint over the last several months — to come to terms on a deal with their lenders to emerge from bankruptcy with a significantly de-levered balance sheet. Indeed, that is the literal plan here.

The debtors have entered into restructuring support agreements with significant and meaningful percentages of holders of first lien loans and second lien notes. Moreover, the debtors have agreements with several key contract counterparties. The end result? The debtors will eliminate over $1b of debt, shed some burdensome royalty and contractual obligations, and get a new money infusion so that it can — against the odds in this hyper-negative-to-coal environment — be better positioned to survive. The reorganized entity, assuming the deal holds, will have $225mm of senior secured debt on it (which will roll in the proposed $175mm DIP facility).*

*The proposed DIP facility includes a new money multi-draw term loan facility of $100mm and a $75mm roll-up of pre-petition first lien debt into a DIP term loan.

• Jurisdiction: D. of MO (Judge Surratt-States)

• Capital Structure: $157mm RCF, $743.3mm first lien term loan, $425mm 11.5% ‘23 second lien notes

• Professionals:

  • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Alice Belisle Eaton, Alexander Woolverton) & Armstrong Teasdale LLP (Richard Engel Jr., John Willard, Kathryn Redmond)

  • Financial Advisor: FTI Consulting Inc. (Alan Boyko)

  • Investment Banker: Jefferies Group LLC

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

• Other Parties in Interest:

  • Ad Hoc First Lien Group

    • Legal: Akin Gump Strauss Hauer & Feld LLP (Brad Kahn, Ira Dizengoff, Zachary Dain Lanier, James Savin) & Thompson Coburn LLP (Mark Bossi)

  • Second Lien Notes Trustee: Wilmington Trust NA

  • Davidson Kempner Capital Management LP

    • Legal: Milbank LLP (Dennis Dunne, Parker Milender)

  • DIP Agent ($175mm): Cortland Capital Market Services LLC

🌿New Chapter 11 Bankruptcy Filing - GenCanna Global USA Inc.🌿

GenCanna Global USA Inc.

January 24, 2020

Cannabis companies may not have access to federal bankruptcy courts but vertically-integrated agtech companies that develop federally-legal hemp-derived cannabinoid products like CBD sure do. 👍

Now, we know what you’re thinking: CBD is all the rage, everyone is talking about it, everyone — even Nana — is using it, and everyone is infusing it in their products, so how the hell could an “industry pioneer” in the space end up in bankruptcy court?!? Sh*t. We have a whole bin of it in the corner of our WeWork office, just under where the beer used to be. In fact, we collectively drank some and rubbed some all over our bodies in a team building exercise just prior to righting and editting this peace so that’s a very fair question.

The companies troubles include:

• An inability to find a strategic partner or find a banker — in the age of WeWork — that would carry the company through a capital-raising IPO.

• Consummate a transaction with a public-traded strategic with a hyper-inflated stock price of its own (callback to the epic rise of weed stock values) prior to reality set in.

• A fire at a production facility. How ironic.

• A contract dispute with a contractor working on a new hemp processing facility. How trite.

• An inability to find proper “financial leadership.” Apparently, the lenders were unimpressed with the company’s chosen CFO and then required the retention of Huron Consulting Group which then led to the sh*tcanning of the CFO which then led to that CFO claiming that there was fraud on the books which then led to an investigation which then concluded that it was all just “psyche, I’m just a sore loser” and….damn this CBD feels good. How could there be drama like this when everyone has this sh*t tingling all over their body?

• Fights with farmers who didn’t get their fixed payments after the company’s sales did not materialize as projected. Ah, projections.

• A price collapse. Per the company, “Beginning in the summer of 2019, pricing in the industry plummeted across all CBD product categories. By the end of the year and through today, bulk product prices in nearly all categories have dropped by as much as 80%. This dramatic plunge in pricing also correlated to the large drop in the public capital markets for cannabis companies in both the US and Canada.” Apparently the fact that this sh*t is easy to produce and popped everywhere in basically 1.2 seconds is not good for pricing. Who knew?

• A lack of regulatory clarity about the status of hemp-derived products has delayed investment and development of products. Or so they say. Seems like everyone under the sun has some CBD-infused product at this point, but whatever. We’ll take this at face value.

Of course, the biggest trouble was probably the involuntary chapter 11 petition filed against the company by three creditors. But, in the spirit of making lemonade, the company will take advantage of the opportunity to convert the company to a voluntary 11 and use the benefit of the automatic stay obtain some much-needed liquidity in the form of a $10mm DIP credit facility and figure out a path forward.

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• Jurisdiction: E.D. of Kentucky (Judge Schaaf)

• Capital Structure: $68.5mm Term Loans (MGG Investment Group LP)

• Professionals:

  • Legal: Benesch Friedlander Coplan & Aronoff LLP (Michael Barrie, Jennifer Hoover, Elliot Smith) & Dentons Bingham Greenebaum LLP (James Irving, April Wimberg, Christopher Madden)

  • Financial Advisor: Huron Consulting Group (James Alt, Marc Passalacqua, Benjamin Smith)

  • Investment Banker: Jefferies Group LLC

  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on the link above for free docket access)

• Other Parties in Interest:

  • Prepetition Lender: MGG Investment Group LP

    • Legal: Schulte Roth & Zabel (Kristine Manoukian, Adam Harris) & Fowler Bell PLLC (Taft McKinstry, Christopher Colson)