Key Energy Services has agreed to an out-of-court restructuring plan. The plan, which has the approval of 99.5% of the supporting lenders involves;
- converting $242 million of debt into 97% of newly-issued equity.
- $20 million of term loans under a new $51 million term loan facility.
- holders of existing equity getting 3% of the newly-issued equity.
- adoption of a new management incentive plan representing up to 9% of the company’s outstanding shares.
Key operates the largest well service rig fleet in the US. It also provides fishing and rental tools, coiled tubing and fluid management services. It is based in downtown Houston.
For the nine months ended September 2019, the company had revenues of $329 million and a net loss of $67 million.
Back in November, I posted that Key had elected not to pay interest on its term loan. Shortly after that, the shares were delisted on the NYSE.
Key originally entered into a pre-packaged bankruptcy agreement in October 2016. As part of that deal, its $1 billion of debt was reduced to a $250 million term loan (with a 12% interest rate). The company exited Chapter 11 in December 2016 with $252 million in equity. At the end of September 2019, the company had negative equity of $18 million.
In other words, its rushed Chapter 11 reorganization was not well thought-out as the company managed to blow through $280 million in equity while barely making a dent in its debt.
The restructuring is expected to be completed by the end of February.