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Basic Energy Services Prepackaged Chapter 11 Bankruptcy

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Basic Energy Services (a/k/a BES Holding Company) and 27 affiliated Debtors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 16-12320. The Company, which provides various well site services to land-based oil and natural gas companies, is represented by Daniel J. DeFranceschi of Richards, Layton & Finger and  Ray C. Schrock of Weil, Gotshal & Manges.

Concurrent with the Chapter 11 petition, the Company also filed a Joint Prepackaged Chapter 11 Plan of Reorganization and related Disclosure Statement. The Company announced entry into a restructuring support agreement (RSA) with its secured term loan lenders and certain holders of its 7 3/4% Senior Notes due 2019 and 7 3/4% Senior Notes due 2022 to effectuate the Plan, which will significantly deleverage the Company’s balance sheet and provide the Company with $125 million of additional liquidity.

Following extensive negotiation with its key creditors, Basic Energy Services’ Plan has the support of 100% of its secured term loan lenders and holders of over 80% of the outstanding 2019 notes and 2022 notes. In addition, the agent for the Company’s secured asset-based lenders, although not a party to the RSA, has been involved in the negotiations regarding the Plan.

Roe Patterson, Basic Energy Services’ president and C.E.O., comments, “The sharp and prolonged period of depressed commodity prices have created poor operating conditions in the field and significantly reduced our operating cash flow. The actions we have taken, combined with the support of our existing lenders, will help us strengthen our balance sheet and position Basic for a sustainable future to benefit from what we anticipate will be an eventual recovery in oil and natural gas prices….The fundamentals of the business are strong and having access to new capital will enable us to strengthen our current business lines, grow organically as opportunities develop and participate in potential merger and acquisition activities in the future.”

Upon effectiveness, the consensual financial restructuring would, among other things, provide for  the following actions: (1) Amend and restate the terms of the Company’s pre-petition term loan outstanding in the principal amount of approximately $165 million to provide for more flexible covenants. (2) Cancel over $800 million of principal and accrued interest in outstanding unsecured notes. In exchange, holders of the unsecured notes will receive 99.5% of reorganized Basic Energy Services’ equity as of the effective date of the Plan (which will be 51.2% of the total outstanding equity in reorganized Basic upon conversion of the mandatorily convertible notes assuming such conversion occurs 36 months after the effective date) and eligible existing noteholders will have the opportunity to participate in a rights offering for $125 million of new mandatorily convertible unsecured notes. (3) Provide existing shareholders with a recovery in the form of 0.5% of reorganized Basic Energy Services’ equity on the effective date (which will be 0.26% of the total outstanding equity in reorganized Basic Energy Services upon conversion of the mandatorily convertible notes assuming such conversion occurs 36 months after the effective date) and 7-year warrants to acquire an additional 6% of total outstanding equity in reorganized Basic Energy Services (after giving effect to the conversion of the mandatorily convertible notes).

The Company’s secured term lenders and certain noteholders have committed to provide up to $90 million of liquidity, in the form of debtor-in-possession financing to help maintain the Company’s uninterrupted operations while in Chapter 11. The Company is in active discussions with potential lenders to find a replacement for its prepetition $100 million asset-based revolving credit facility, under which no revolving borrowings and approximately $51 million in contingent letter of credit obligations are outstanding.

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The post Basic Energy Services Prepackaged Chapter 11 Bankruptcy appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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