Quantcast
Channel: Daily Bankrupt Company Updates | Bankrupt Company News
Viewing all articles
Browse latest Browse all 4593

Tapstone Energy, LLC – Independent Andarko Basin E&P Solicits Stakeholder Support for Debt Restructuring, Hopes to Avoid Chapter 11 and Shed $450mn-$500mn of Debt

0
0

March 11, 2020 – On March 9, 2020, Tapstone Energy, LLC, an independent E&P company with operations in the Andarko Basin, and certain of its affiliates (collectively, “Tapstone” or the "Company") distributed a combined Offering Memorandum/Disclosure Statement (the "Combined Document") to holders of their revolving loans (the “RBL Loans”) and holders of their 9.75% Senior Notes due 2022 (the “Notes”).

The Combined Document requests support from these stakeholders for either an "out-of-court" or an "in-Court" debt-for equity restructuring, with Tapstone expressing a preference for the former but simultaneously preparing for the latter should it not receive the requisite stakeholder support (an out-of-court restructuring would require 100% support from each of the two key creditor groups). If Tapstone does manage to meet that unanimous threshold (it was at 93.55% and 75.05%, respectively, for the RBL Loans and the Notes as at March 9th) its out-of-court restructuring will involve an exchange offer in respect of the Notes (with noteholders also given an option to subscribe to a $50.0mn rights offering if holders of RBL Loans come up short in their election of new convertible preferred equity in place of new first lien term loans) and the conversion of RBL loans into a mix of new first lien term loans, new common equity and new convertible preferred equity. The key date to watch is April 3rd, which is the deadline for the exchange offer, the RBL election deadline and the prepackaged Plan voting deadline.

In a summary of midpoint recoveries (see below), Tapstone anticipates a 64.1% recovery for holders of the RBL Loans and a 7% recovery for holders of the Notes.

Restructuring Overview

The outstanding indebtedness of, and equity interests in, Tapstone will be restructured through either (i) an out-of-court transaction (the “Out of Court Restructuring”) or, if conditions precedent to consummation of the Out of Court Restructuring are not satisfied, (ii) via voluntary pre-packaged Chapter 11 cases to be filed in the United States Bankruptcy Court for the District of Delaware.

Both out-of-court and in-court paths end up in the same place with holders of the RBL Loans offered two options: Holders choosing "option A" will see their prepetition debt exchanged for new first lien term loans (58.5%) and new common equity (41.5%) and holders choosing "option B" will see their debt exchanged for shares of new convertible preferred equity and new common equity (see page 310 of the Combined Document for a detailed breakdown of what are complicated mechanics).

Holders of the Notes will receive their pro rata share of new common equity and pro rata share of a new unsecured subordinated term loan in the original principal amount of $4.35mn.

Holders of the existing Tapstone equity will get nothing.

Restructuring Support Agreement

Tapstone has entered into a restructuring support agreement (the “RSA,” attached to the Combined Document as Annex C) with (i) holders of approximately $221,088,000 (or 75.05%) of the outstanding principal amount of the Notes, (ii) certain RBL Lenders (the “Consenting RBL Lenders”) collectively holding approximately 93.55% of the outstanding principal amount of the RBL Loans and letters of credit obligations(“Letters of Credit”) issued under the Company’s May 2018 Second Amended and Restated Credit Agreement, (the “RBL Facility”), (iii) all holders of the Company’s outstanding Class A member interests (including GSO Capital Partners LP ('GSO')), (iv) the "Backstop Parties" (certain consenting noteholders who will receive, as consideration for the "Backstop," additional equity in the reorganized company: the “Backstop Premium”) and (v) certain counterparties to swap contracts under the RBL Facility (collectively, (i) through (v), the “Consenting Stakeholders”). Pursuant to the RSA the Consenting Stakeholders have agreed to support each of the out-of-court or in-court restructuring paths.

Capital Structure

The current capital structure of the Company is as follows: 

  1. $302.5mn ($294.5mn principal amount) of indebtedness under a May 2, 2018 credit agreement, among Tapstone, Bank of America, N.A., as administrative agent and L/C issuer (the “RBL Agent”), and the other lenders party thereto (the “RBL Credit Agreement”), comprised of revolving loans (the “RBL Loans”) and letters of credit (“Letters of Credit”);
  2. $318.7mn of indebtedness under a May 17,2017 indenture, among Tapstone and Tapstone Finance Corp., as issuers, the guarantors from time to time party thereto, and U.S. Bank National Association, as trustee (the “Indenture Trustee”);
  3. Equity interests in Tapstone, including (i) Class A member interests (“Class A Member Interests”), (ii) Class B member interests (“Class B Member Interests”) and (iii) incentive units (the “Incentive Units”) and 
  4. Intercompany Interests.

Exit Financing

Tapstone anticipates that its post-emergence capital structure would consist of:

  • A first lien term loan facility in an aggregate principal amount of $145.0mn (the “New First Lien Term Loan”) 
  • An unsecured subordinated term loan in an aggregate principal amount of $4.4mn (the “Subordinated Term Loan”).

The following documents were attached to the Combined Document:

  • Annex A: Documents to be completed by Noteholders
  • Annex B: Documents to be completed by RBL Lenders
  • Annex C: Restructuring Support Agreement (with Term Sheet at Exhibit A)
  • Annex D: Prepackaged Chapter 11 Plan
  • Annex E: Liquidation Analysis
  • Annex F: Valuation Analysis
  • Annex G: Financial Projections
  • Annex H: Restructuring Transactions Memorandum
  • Annex I: Form of Supplemental Indenture

Projected Recoveries and Liquidation Analysis (see Annex E: Liquidation Analysis for Notes)FN3 Proposed Plan Recovery to RBL and Notes assumes that only Crossholders elect Option B. Recovery to Notes represents recovery to non-Crossholders.

Key Dates for Holders of Notes

  • Exchange Offer Withdrawal Deadline: March 20, 2020
  • Expiration of Exchange Offer: April 3, 2020
  • Consent Solicitation Withdrawal Deadline: March 20, 2020
  • Consent Deadline: April 3, 2020
  • Rights Offering Subscription Deadline: April 3, 2020
  • Prepackaged Plan Voting Deadline: April 3, 2020
  • Key Dates for Holders of RBL Loans

Key Dates for Holders of RBL Loans

  • RBL Transaction Election Deadline: April 3, 2020
  • Prepackaged Plan Voting Deadline: April 3, 2020

About Tapstone

According to Tapstone: "We are a growth-oriented, independent oil and natural gas company focused on the development and production of oil, natural gas, and NGLs in the Anadarko Basin in Oklahoma, Texas and Kansas.

Our core development area is located in the northwest continuation of the geographic region commonly known as the STACK play in the Anadarko Basin (the 'NW Stack'). We have a large, contiguous acreage position in the NW Stack that is characterized by significant operational control, multiple stacked benches and an extensive inventory of horizontal drilling locations that are expected to offer attractive single-well rates of return. We also own interests in legacy producing oil and natural gas properties in various fields located in the Anadarko Basin with long-lived reserves, predictable production profiles and limited capital expenditure requirements."

Read more Bankruptcy News

The post Tapstone Energy, LLC – Independent Andarko Basin E&P Solicits Stakeholder Support for Debt Restructuring, Hopes to Avoid Chapter 11 and Shed $450mn-$500mn of Debt appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


Viewing all articles
Browse latest Browse all 4593

Latest Images

Trending Articles





Latest Images