Weeks after indicating it would miss loan repayments, Oklahoma City’s Chaparral Energy, Inc. announced Monday it filed for Chapter 11 bankruptcy.
The filing was made Sunday in the U.S. Bankruptcy Court for the District of Delaware as part of a restructuring agreement the company made with some of its debtholders.
““While we have taken carefully measured and decisive action to address the challenges of 2020, the overall impact to the energy industry, including Chaparral, has been severe. Therefore, after thorough analysis of our strategic options, we determined that a voluntary Chapter 11 filing with broad creditor support provides the best course for Chaparral and its stakeholders,” said Chief Executive Officer Chuck Duginski. “A swift restructuring will right-size our balance sheet, improve our cost structure and
best position Chaparral for the future.”
He said the filing will allow Chaparral to continue operations without interruption. Under the filing, the company will restructure its balance sheet by equitizing all $300 million of its existing unsecured bond obligations. The company said the filing will also boost the company’s liquidity position through $175 million in lending obligations.
Chaparral is asking investors to approve the Prepackaged Plan but stated that 78% of the loans under the company’s first lien revolving credit facility and 78% of its 8.75% Senior Notes due 2023 agreed to vote in favor of the plan.
“Chaparral expects the pre-packaged Chapter 11 reorganization to be completed relatively quickly due to the broad support of its creditors,” stated Duginski.
As of Aug. 14, the company had about $32 million cash on hand. It said that combined with its normal operating cash flow, there would be enough to allow normal operations to continue as the firm goes through the Chapter 11 restructuring period.
“To meet these objectives, Chaparral has filed a series of motions with the Court that will, upon approval, allow the Company to continue to pay employee wages and benefits without interruption, make royalty and working interest payments when due, and pay suppliers and vendors in full under existing terms for goods and services, among other things,” stated the company’s announcement.
Chaparral ended all of its outstanding derivative contracts in connection with the forbearance by its lenders. OK Energy Today had reported on two forbearance filings made by Chaparral with the Securities Exchange Commission.
Chaparral received $28.2 million in proceeds from the early termination of the contracts and used $24 million to pay down the borrowings. The move reduced the company’s outstanding balance to $188.5 million.
“Through the Chapter 11 process, Chaparral expects to significantly delever its balance sheet and strategically position the Company for long-term success. As contemplated by the Agreement, upon the Company’s emergence from Chapter 11, the Credit Agreement borrowings will be partially repaid
using a portion of cash on hand and the proceeds from a $35 million second lien convertible note offering to be issued by Chaparral upon emergence from bankruptcy, which is
fully backstopped by certain holders of Chaparral’s Senior Notes,” stated the company announcement.
In September 2019, Chaparral sold its Oklahoma City headquarters as reported by OK Energy Today.
Click here to read entire announcement.