Tag Archives: Bankruptcy reorganizations

Houston oilfield service company files for bankruptcy

Superior Energy Services has filed for Chapter 11 bankruptcy. It expects to convert $1.3 billion of debt into equity and may split into two companies.

Superior has its head office in downtown Houston. It was recently delisted from the NYSE because its market capitalization was below $15 million. The company has two main businesses:

  • Remainco : An international business involved in drill pipe rentals, bottom hole assemblies, completion tools and well control services. The business has projected revenues of $550 million.
  • NAM : An onshore US business involved in service rigs coiled tubing, wireless, pressure control and fluid management. This business has projected revenues of $260 million in 2021.



Prepackaged bankruptcy agreement

The company has the support of 69% of the company’s senior unsecured noteholders. The noteholders have the right to decide whether or not to split the company into two. If they do, they would get 98.5% of the equity of Remainco and 95% of the equity of NAM. Existing shareholders will get the rest, though a management incentive plan will be put in place. This will dilute the percentages a little bit.

Back in December 2019, Superior announced the merger of its US completions business with Forbes Energy Services, with the combined entity to be spun off. The deal was called off in May due to deteriorating market conditions.

As part of the bankruptcy proceedings, the Board of Directors has agreed pay $7.3 million in retention bonuses to the six executive officers of the company. CEO David Dunlap gets $3.2 million, while CFO Westy Ballard gets $1.1 million.

Retention Plan

In March, Mr Dunlap got an annual cash bonus of $0.9 million. He also got an additional payout of $1.275 million, in cash, for performance stock units (PSU) for the period 2017-2019. This payout was primarily due to Superior being in the top 17% of total stockholder returns of its peer group, over that three year period.  Mr Ballard got a $346,000 annual bonus and $300,000 for the PSUs.

Complete Production Services

The company’s debt problem stems all the way back to October 2011 when it agreed to buy Complete Production Services for $2.9 billion. It paid $553 million in cash and issued stock for the rest. As part of the deal financing, in December 2011, it issued $800 million of unsecured senior notes, due 2021, to repay $650 million of debt that Complete owed. The other $500 million of notes were also, effectively, issued in 2011, though they were refinanced in 2017.

The $2.9 billion price for Complete Production Services included $2.3 billion in goodwill and intangibles. In 2015, the company wrote goodwill down by $1.3 billion. By 2018, all the goodwill had been written off.

Mr Dunlap became CEO of Superior 18 months before the deal with Complete Production Services.

SEC filing – Superior bankruptcy

 

Seismic company files for Chapter 11 bankruptcy

SAExploration Holdings has filed for Chapter 11 in a pre-packaged bankruptcy deal. The plan will reduce net debt by $74 million with the lenders getting new common stock in the company.

The company is based in west Houston and performs seismic operations around the world. It started out in Peru in 2006 as Exploración Sudamericana (South American Exploration). The company later expanded into Columbia (2008), Papua New Guinea (2010) and North America (2011). It went public in 2013 via a reverse takeover of a blank check company.



SAEX has reported recurring losses from operations and have not generated cash from operating activities for the six years ended December 31, 2019.

Fraud allegations

In February the company accused Jeff Hastings, the former CEO, and Brent Whiteley, the former CFO of misappropriating nearly $17 million. As a result, the company had to restate its financial results going back to 2014 and shareholder’s equity swung to a deficit that has grown to $33 million, at the time of filing. Investigations by the SEC, Department of Justice and the Alaska Department of Revenue continue.

The stock was delisted from NASDAQ in June 2020.

Debt reduction

The company has $60 million outstanding in convertible loan notes and $29 million on a term loan. It has received approval from 100% of the loan note holders and 82% of the term loan holders to eliminate these balances in exchange for a new first lien $15 million loan and 97.5% of equity in the newly-reorganized company.

The company also has a credit facility of $20.5 million, an equipment finance loan of $8.2 million and a PPP loan of $6.8 million. The credit facility will convert to a second lien facility for the same amount. The equipment finance and the PPP loans will remain outstanding.

SAEX – Declaration in support of Chapter 11 by CEO

 

Offshore Drilling Contractor files for bankruptcy

Noble Corporation has filed for Chapter 11 bankruptcy in the Southern District of Texas. Technically, the company has its head office in London, but, operationally, the company is run from its Sugar Land offices.

Noble has a fleet of 12 drillships and semisubmersibles and 12 jackup rigs, largely focused on ultra deepwater. Of the 12 floaters, five are cold-stacked while four of the jackup rigs are warm-stacked. [Warm-stack means the rig is in port with a crew ready to go, cold-stack means the rig is being stored at minimum expense].



Agreement with Bondholders

Noble has agreement with two ad hoc groups of the largest bondholders. Combined, they represent about 50% of $3.4 billion of unsecured debt outstanding. They need to get approval from two-thirds of the bondholders for the plan to be effective.

Under the proposed plan, the unsecured debt will be cancelled and exchanged for, effectively, 86% of the equity in the reorganized company. The bondholder have also agreed to invest $200 million of new capital in the form of new second lien notes. 10% of the new equity will be reserved for a management incentive plan. Existing shareholders will get 4% of the new equity.

A new $675 million secured revolving credit facility will also be provided by the current syndicate of credit facility lenders. The borrowings on the current facility are $550 million.

Unsecured trade creditors will be paid in full.

CEO and CFO transition

In February, Noble promoted Robert Eifler from Senior VP, Commercial to CEO, replacing Julie Robertson, who became Executive Chairman. Unusually, Ms Robertson (who has been with the company since 1979) got a lump sum payment of $3.75 million as part of the transition, even though she wasn’t leaving the company.

That CEO transition promptly triggered a CFO transition. Stephen Butz, who had only joined the company in December 2019, resigned in March. He got to keep $450,000 of his $1.1 million sign-on bonus. Mr Butz had replaced Adam Peakes who had left in September 2019 with a $1 million severance.

The current CFO is Richard Barker, who joined from Moelis & Company, an investment bank. He was awarded cash retention bonuses of $725,000 and $575,000, to be paid in December 2020 and December 2021 respectively.

SEC filing – Noble Corp bankruptcy

 

E-commerce provider files for bankruptcy after hacking breach

Austin-based Volusion LLC has filed for Chapter 11 bankruptcy in the Southern District of Texas. Volusion is a provider of cloud-hosted online stores for small and medium-sized businesses. However, in late 2019, hackers compromised the Google cloud infrastructure of the company and stole 239,000 credit card records. The hackers sold the stolen credit cards for at least $1.6 million.



Volusion was founded by Kevin Sproles in 1999 when he was 16 years old. He returned to the company in 2015 as CEO, though he stepped down from that role in August 2019, shortly before the breach took place.

Mr Sproles still owns 88% of the equity. Main Street Capital, a Houston-based public company, owns 8% of the equity, which they valued at $12.95 million in their most recent annual report. Main Street also has a further $19.2 million in secured debt and $0.3 million in unsecured debt invested in the company.  The other 4% of the equity is owned by another Houston company, HMS Equity Holdings, which also has secured debt outstanding.

According to a research report by Gemini, the hackers inserted malicious JavaScript code onto the company’s servers. This was then loaded onto at least 6,589 online stores of customers of Volusion. The malicious code recorded payment card details as it was being entered onto checkout forms. The breach occurred on September 7, 2019 and was discovered on October 8. The stolen card data was put up for sale on the dark web in November.

Tim Stallkamp of Conway MacKenzie has been appointed Chief Restructuring Officer of the company.

Volusion llc Chapter 11

 

 

Another Houston E&P company files for bankrutpcy

Rosehill Resources, which has its head office in west Houston, has filed for bankruptcy in the Southern District of Texas. At the beginning of the month, the company had stated it had a pre-packaged plan agreed with most of its creditors.



History of the company

The company operates in the Delaware Basin, a sub-basin of the Permian Basin where it had 15,785 gross acres. It currently operates or owns working interests in 133 oil and gas wells, though, back in March, it announced the suspension of all drilling and completion activity for the rest of 2020. The company was formed in 2017 when KLR Energy Acquisition, a blank check company, acquired Tema Oil & Gas in a deal valued at $445 million.

Amounts owed

At the time of filing, the company owed $226 million on a revolving credit facility. In March the company had drawn $340 million on the revolving credit facility, however it monetized all its hedges for $88 million to pay the balance down. The company also owed  $106 million on second lien 10% Secured Notes due January 2023. The notes are owned by EIG Management Company or its affiliates, an investment firm.

The main terms of the bankruptcy plan are

  • The Secured Noteholders will get 68.60% of the equity in the reorganized company
  • The Secured Noteholders and Tema have agreed to provide a $17.5 million debtor-in-possession financing facility. In return they will get 25.84% of the equity.
  • Tema will get 4% of the equity. This is because, at the time of sale, it had a tax receivable that Rosehill agreed to collect on its behalf, for a 10% administrative fee. At the time of filing, this was valued at $89 million.
  • The Preferred Series A stock holders will get 1.48%, provided none of the stock holders objects to the plan.
  • A new revolving credit facility of $235 million will be put in place.
  • All unsecured creditors will be paid in full

Rosehill Chapter 11

Well known Oilfield Services company files for bankruptcy

BJ Services, which has its head office in Tomball, TX has filed for Chapter 11 bankruptcy. There is no pre-packaged plan in place. If agreement can’t be reached with the lenders in the next few days, the company may have to liquidate. The company has laid off 800 employees since March and a further 1,250 jobs are at risk.

BJ Services currently operates 42 pressure pumping fleets (2.1 million hydraulic horsepower) and 180 cementing pumps.



History of the company

The company has one of the most well-known brand names in oilfield services. Byron Jackson, an inventory of pumps for farmers and miners in California, founded the original company in 1872. Hughes Tool acquired the company in 1974. Hughes merged with Baker International to form Baker Hughes in 1987. In 1990 Baker Hughes spun off BJ Services into a public company only to acquire it again in 2010 in a $5.5 billion transaction.

The current incarnation was created in November 2016 when Baker Hughes contributed its pressure pumping assets into a new joint venture with Allied Completion Holdings, another pressure pumping company that is backed by CSL, a private equity firm based in Houston.  Baker Hughes ended up owning 47% of the joint venture and its share was valued at $566 million. That investment has been written down to zero due to losses incurred by BJ since 2016.

BJ Services filed for an Initial Public Offering in June 2017 though at the time the company was losing money, even at the EBITDA level. It never completed its offering and eventually withdrew its registration statement in March 2019.

Current debt load

BJ Services currently has $357 million of debt. This comprises $102 million of an asset-based loan, $190 million in equipment term loans and $65 million for real estate term loans. These loans are held by different lender groups.

The drastic downturn in drilling and completions caused by the collapse in oil prices in March 2020 caused the company to engage Kirkland & Ellis and PJT Partners as restructuring partners.

CSL offered to invest an additional $75 million in new-money in exchange for the vast majority of the equity in the reorganized company. However, the deal was contingent on generating $120 million from the sale or liquidation of certain non-core assets. That money would go to the equipment lenders.

The company also expected to sell the cementing business for $30 million or more, on a going-concern basis.  On the pressure pumping side, CSL has bid for 3 of the 42 frac fleets on a going-concern basis. CSL has also offered to buy the research and development for the next generation of pressure pumping units.

Proposed deals fall through

The proposed deals fell through because the company, CSL and the various lenders couldn’t agree on terms of the proposed write-downs to be shared by the parties and how the businesses being sold would be funded on a going-concern basis. Given the potential conflicts that CSL has and that the equipment lenders have collateral in the pressure pumping and cementation fleets but not in the R&D, I am not surprised.

The company is trying to get all parties to agree a reorganization plan in the next 7 days. If not, the company may not have funds to operate on a going-concern basis and may be forced to liquidate its assets in an orderly wind-down.

Declaration by BJ Services CEO in support of Chapter 11 filing

 

Houston Frac sand company files for bankruptcy

Hi-Crush, a frac sand supplier, has filed for Chapter 11 bankruptcy. The company, which is based in the Galleria, has been hard hit by the downtown in completion activity following the COVID-19 pandemic.



It’s a pre-packaged bankruptcy as the company has agreement of 94% of the senior unsecured noteholders. The main terms are;

  • $450 million senior loan noteholders get 100% of the new common stock to be issued by the company.
  • Existing shareholders will be wiped out
  • There will be a $43.3 million rights offering whereby existing noteholders and other eligible holders of unsecured claims will be granted rights to purchase new secured convertible notes.
  • Debtor-in-financing facilities including a $25 million asset-based revolving loan facility and a $40 million delayed-draw term loan. The latter will convert into new senior secured convertible notes upon exit from Chapter 11.

Retention Bonuses

Of course, it’s not a Energy bankruptcy without retention bonuses for senior management.  These were paid on Friday 10 July. CEO Robert Rasmus got a $1.35 million retention payment (more than 2x base salary), COO Michael Oehlert was paid $693,750 while General Counsel Mark Skolos got $552,750.  CFO Phil McCormick got a $360,000 bonus. This replaces the $250,000 retention bonus that was promised when Mr McCormick promoted to the CFO position in December 2019.

The bonuses will be considered earned and therefore not repayable once the company exits Chapter 11.  That is expected within 60 to 90 days. The executives are not eligible for any annual bonus in 2020.

$2.5 billion market cap in 2014

Hi-Crush went public in 2012 and, initially, was primarily a supplier of ‘Northern White’ sand from Wisconsin, a premium sand used in fracking. The company had a peak market capitalization of over $2.5 billion in the middle of 2014. In recent years, E&P operators began seeking cheaper alternatives and the company made acquisitions of mines in the Permian Basin.

The company was originally a limited partnership before converting to a C-Corp in 2019. However a partnership structure is not ideal when the underlying business is so volatile.

Excessive distributions

The company paid out $82 million in distributions in 2017 and $167 million in 2018. These figures approximate to net income for those years. However the company also had heavy capital expenditures in each of those years of about $100 million in excess of the depreciation charge. The large cash outflow was funded by an additional $250 million in debt, at 9.5% interest, in 2018.

Even though that debt was not due to be repaid until 2026, the debt burden was too much for the company to bear.

SEC filing – Hi-Crush bankruptcy

CFO leaves as Houston retailer files for bankruptcy

Stage Stores has filed for Chapter 11 bankruptcy. It will simultaneously solicit bids for a going concern basis and initiate an orderly wind-down of operations.



CFO Jason Curtis is leaving the company to take a position with another retailer, effective May 22, 2020. CEO Michael Glazer will oversee the finance function. The company has also retained Rick Stasyszen to assist Mr Glazer. He previously served as the company’s Senior VP, Finance and Controller until May 2019.

The company operates 738 stores in 42 states. Historically, the company operated department stores under the names of Bealls, Goody’s, Palais Royal and Peebles. It was in the process of converting all its stores to the Gordman’s off-price brand.

All its stores closed on March 27, 2020 due to COVID-19. The company anticipates that approximately 557 stores will open on May 15. A second phase of approximately 67 stores will open on May 28 with the balance on June 4.

The company has been struggling for a few years. It last made an operating profit in 2015 and the coronavirus was the last straw.

As of February 2019, the company had 13,600 full-time and part-time employees.

https://www.businesswire.com/news/home/20200510005033/en/

Houston drilling contractor files for bankruptcy

Diamond Offshore has filed for Chapter 11 bankruptcy. The company operates 15 offshore drilling rigs and employs around 2,500. It has its head office in west Houston.



The company has made operating losses in four of the last five years. The company listed assets of $5.8 billion and debts of $2.6 billion in its Chapter 11 filing. The debt includes approximately $2 billion of senior notes owed to bondholders. The company will use its $435 million cash on hand to fund its operations while in bankruptcy.

Loews Corporation, a publicly-traded company whose primary business is insurance, owns 53% of Diamond. They will take a significant write-down on their $1.5 billion investment.

The Board of Directors of Diamond has decided to accelerate vesting of cash awards for 2018 and 2019 performance. Normally the awards would vest over three years. In order to retain key employees during bankruptcy, the Board has paid CEO Marc Edwards $1.75 million. Other members of the management team got between $140,000 and $261,000.

Between now and end of the first quarter of 2021, nine key employees will receive quarterly cash bonuses, subject to meeting certain performance targets. The target bonus for the CEO is $5 million. The target for the CFO Scott Kornblau is $555,000. The three performance targets are average rig efficiency, lost time incidents and reduction in overhead expenses.

On April 15, the company notified the Texas Workforce Commission that it intended to lay off 102 from its corporate office.

SEC filing

Houston E&P company files for bankruptcy

Yuma Energy has filed for bankruptcy. It becomes the first publicly-traded Houston-based E&P company to file since the recent oil price crash.

The company has its head office in the Galleria area. Historically operations were focused on SE Texas and Louisiana, though it does have some acreage in the Permian basin.  For the nine months ended September 30, it had revenues of only $7 million and a net loss of $6 million (ignoring impairments).

The company intends to liquidate its assets within 90 days.

The company has been struggling for some time. Eighteen months ago, it hired an investment banking firm to advise the company of strategic alternatives. In March 2019, it hired Anthony Schnur as its Chief Restructuring Officer and interim CEO.

In September 2019, the company thought they had found a solution when Red Mountain Capital Partners bought the outstanding debt of $35 million with the intent of converting most of the debt to common stock. Unfortunately, the stock conversion piece of the deal unraveled in March as the deterioration in market conditions caused Yuma to breach its covenants.

Anthony Schnur resigned from his positions with the company. He recently joined Ankura Consulting Group, who were promptly hired by the company as its financial advisor!

https://www.prnewswire.com/news-releases/yuma-energy-inc-files-for-chapter-11-protection-301041610.html