Cypress moves forward with financial restructuring and Chapter 11

Introduction to Chapter 11 Bankruptcy | ABC-Amega

 

Tulsa’s Cypress Environmental Partners, L.P. filed Chapter 11 in bankruptcy court to deal with its more than $58 million in debt. The company on Monday announced the next step in its previously announced plan to pursue a court-supervised restructuring.

“Cypress will emerge as a strong, reorganized company with no debt that is focused on serving our customers and growing its business,” said  Peter C. Boylan III, Chairman, President, and CEO.

“We remain disappointed that our minority unitholders, insiders, and our management team will have lost their entire equity investment as a result of this Plan,” he added.

On Sunday, May 8, 2022, Cypress entered into a Restructuring Support Agreement with Argonaut Private Equity, a Tulsa-based private equity firm and the sole senior secured lender of the company, pursuant to which Argonaut agreed to vote in favor of a joint pre-packaged plan of reorganization of the company and its subsidiaries under Chapter 11 of the U.S. Bankruptcy Code.

Cypress Environmental Partners | LinkedIn

The plan was filed with the U.S. Bankruptcy Court for the Southern District of Texas on May 8, 2022. The RSA and the plan contemplate a debt-to-equity recapitalization transaction, whereby Argonaut will receive 100% of the new equity interests of the reorganized company  in exchange for extinguishing the obligations to Argonaut remaining under the company’s credit agreement.

In addition, the plan provides for the payment in full of priority and trade claims and an equity commitment from Argonaut to provide working capital to the Reorganized Company upon emergence. Argonaut will also provide a Debtor-In-Possession loan to Cypress to fund operations, if necessary.

As the new senior secured lender, we look forward to emerging from this reorganization as the new owner with a platform for growth. We remain committed to serving Cypress’ customers with excellent service, working with the talented management and employees, and diversifying the company into exciting new inspection opportunities” said Steve Mitchell, CEO and Managing Director of Argonaut Private Equity.

The Reorganization Transaction will provide the Reorganized company with a fresh start, deleveraging its balance sheet, providing a stable platform for the Reorganized company to grow post-emergence, and preserving over 350 high-paying jobs for the Company’s employees. Cypress expects to operate in the ordinary course of business during these proceedings with minimal disruption.

Given the amount of Cypress’ outstanding senior secured debt, which currently totals $58.1 million, Cypress continues to expect that the Reorganization Transaction will result in its outstanding common units and Series A preferred units having no value. As a result, Cypress anticipates that the New York Stock Exchange will announce its intention to delist Cypress’ common units, which are currently listed on the NYSE under the symbol “CELP.”

Upon delisting of the Common Units, Cypress intends to file a Form 15 with the U.S. Securities and Exchange Commission to voluntarily deregister its Common Units and suspend its reporting obligations under the Securities Exchange Act of 1934, as amended. Bankruptcy Court approval is required to engage or retain professional services firms including independent registered public accounting firms, and consequently, Cypress will be unable to file its Quarterly Report on Form 10-Q for the three months ended March 31, 2022 prior to the SEC filing deadline on May 16, 2022.

Source: press release