Seventy Seven Energy Inc., a company that offers drilling, pressure-pumping, oilfield rental tools and trucking services, filed for a prepackaged Chapter 11 bankruptcy on Tuesday in order to eliminating more than $1 billion in debt and converting its debt into equity in a reorganized company.
The bankruptcy comes as two years of depressed energy prices which have forced scores of oil-and-gas producers into bankruptcy. The company filed for protection in U.S. Bankruptcy Court in Wilmington, Del., which listed assets of $1.7 billion and debts of $1.8 billion until the date of April 30, with a “prepackaged” chapter 11 plan after garnering support from its creditors to support the restructuring proposal. Such preapproved plans are becoming increasingly popular with companies and investors, who want to minimize the time and expense of chapter 11 balance sheet restructuring. Seventy Seven still need to borrow up to $100 million to help finance operations during the bankruptcy, according to court documents.
Under the protection of Chapter 11 bankruptcy term, all trade creditors, suppliers and contractors will be paid in ordinary course of business, and all commercial and operational contracts will remain in effect in accordance with their terms. Through eliminating $1.1 billion, Seventy Seven’s 2019 unsecured bondholders will receive at least 96.75% equity in the restructured company in exchange for forgiveness of the $650 million they’re owed. A second group of bondholders are slated to get a 3.25% equity stake plus warrants for 15% of the new common stock if they vote to support the plan.
The company’s term-loan lenders will receive a 2% payout of their loan upfront and a better collateral package securing the remaining loan, which will be carried over. The incremental term-loan lenders will be paid at least $15 million upfront, and the remaining $84 million balance of its loan will remain in place.
The law firm Baker Botts is in charge of Seventy Seven Energy Inc. bankruptcy matter and employed Alvarez & Marsal as the restructuring adviser. Lazard Freres & Co. as its investment banker. The case number is 16-11409 and Judge Laurie Selber Silverstein has been assigned the case.