Tulsa-based Cypress Environmental Partners, L.P. admits it continues to struggle financially and might be approaching operational collapse if it cannot reach a new credit agreement.
The company says because it has yet to get a new credit agreement, its filing the annual 10-K report with the SEC has been delayed.
The company filed a separate report with the SEC explaining it continues to work with its lenders and their financial and legal advisors regarding the credit agreement that matures on May 31, 2022. Cypress admitted in the report that it could not make assurances it will be able to successfully extend the credit agreement beyond the May 2022 maturity date on favorable terms, if at all.
Leadership indicated if that happens, the company might not be able to continue operations.
If at the time of filing the Form 10-K, Cypress does not have a credit facility that provides access to funding for at least 365 days, Cypress expects that the financial statements in its Form 10-K will disclose substantial doubt about its ability to continue as a going concern, as defined under U.S. Generally Accepted Accounting Principles. This condition would result in the auditor’s report on the financial statements including a “going concern” uncertainty paragraph, which would be an event of default of the credit agreement.
Cypress remains in compliance with the terms of the credit agreement and is in ongoing discussions with its lenders. Cypress recently received and is considering a proposal for a consensual process that included retaining investment bank Piper Sandler to solicit potential debt and equity investors regarding their interest in recapitalizing Cypress.
Cypress also continues to negotiate with plaintiffs’ lawyers to resolve litigation and arbitration exposure regarding Fair Labor Standards Act claims and associated indemnification demands from customers against whom some such claims have been asserted.
“The ability to resolve such exposure is an important factor in our ability to successfully attract new capital without an in court restructuring. Cypress and the lenders may pursue a number of options, including but not limited to the possibility of a sale of the debt to a third party or related party, or a court-supervised restructuring,” stated the company.
The New York Stock Exchange continues to monitor trading in Cypress’s common units for compliance with the NYSE’s requirement of a $15 million market capitalization over 30 trading days; the failure to satisfy this requirement would result in immediate suspension and commencement of delisting procedures.
It is likely that Cypress’s common units would be delisted from the NYSE in the event of any restructuring or liquidation proceeding. Such a proceeding would also likely lead to Cypress’s common and preferred equity having no value, given the amount of Cypress’s senior secured debt.
Cypress had yet to release its fourth quarter 2021 earnings report. The last quarterly report, one for the third quarter was released last fall. While the third quarter performance showed some sequential improvement from the prior quarter, as Peter C. Boylan III, Chairman, President, and CEO put it, the company also had to discontinue its Pipeline & Process Services segment.
He said the company was in the process of selling those assets and planned to use the proceeds to reduce debt. Cypress listed net debt of $50 million at the end of the third quarter. It already had amended its credit facility in August 2021 to eliminate the financial ratio covenants.