Breitburn Energy Partners today filed for Chapter 11 in bankruptcy court in Manhattan, the company announced this morning.
The company said it had a $75 million DIP facility, adding that the DIP lenders “have offered to arrange an additional $75 million of DIP financing at Breitburn’s request.”
The company said it would use Chapter 11 “to continue and complete … discussions with key stakeholders and evaluate other value-maximizing opportunities.”
As reported, the company elected to defer interest payments due on April 14 of about $33.5 million on its 7.875% notes due April 2022 and about $13.2 million on its 8.625% senior notes due October 2020, entering into a customary 30-day grace period to explore “strategic alternatives to strengthen its balance sheet.”
In today’s statement, the company said that over the last 30 days it “has been engaged in constructive discussions with its second-lien noteholders and the advisors to its unsecured noteholders regarding the need for, sponsorship of, and terms of a balance sheet restructuring.” The company added that it has “simultaneously … been engaged in constructive discussions with its revolving lenders regarding their support for emergence financing, as well as the treatment of Breitburn’s valuable hedging assets in conjunction with its emergence from the Chapter 11 cases.”
According to an affidavit filed in the case by the company’s CFO, James Jackson, despite the productive discussions, the company could not complete an out-of-court restructuring within the 30-day time frame.
Meanwhile, in what has now become a familiar refrain to both the energy and distressed sectors, Hal Washburn, the company’s CEO, explained the company’s Chapter 11 filing as the result of “the prolonged decline in commodity prices that began in 2014,” adding, “Our long-lived, low-decline portfolio of diverse assets continues performing in line with our expectations, but the current outlook for commodity prices makes our existing debt burden unsustainable.”
The company’s Chapter 11 petition listed roughly $4.7 billion in assets and $3.4 billion in debts.
The DIP facility is being provided by a group of the company’s first-lien lenders, court filings show, with Wells Fargo acting as agent. The named lenders on the loan documents are Citibank and J.P. Morgan Chase.
Upon interim approval, the facility would provide the company with $75 million, along with $75 million in available letters of credit. Upon final approval, an incremental $75 million would be available to the company, subject to additional lender approvals and documentation.
Interest under the facility will be at L+575, with no LIBOR floor.
As reported, Weil, Gotshal & Manges is the company’s legal advisor, Lazard its investment banker, and Alvarez and Marsal its financial advisor. — Alan Zimmerman
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