Warren Resources files bankruptcy, enters restructuring support deal

By Caroline Salls

Pittsburgh, June 2 – Warren Resources, Inc. filed Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the Southern District of Texas.

The company entered into a restructuring support agreement with plan sponsor GSO Capital Partners LP and an informal committee of 9% senior unsecured noteholders.

The terms of the restructuring agreement include the following:

• Conversion of the claims of the company’s pre-bankruptcy first-lien lenders into 82.5% of the equity, subject to dilution by a management incentive plan, in the reorganized Warren debtors and a new first-lien secured term exit facility not to exceed $130 million, plus, at the plan sponsor’s option, the amount outstanding under a $20 million debtor-in-possession facility;

• Conversion of the claims of pre-bankruptcy second-lien lender Claren Road, senior noteholders and the claims of Citrus Energy into the remaining 17.5% of the equity in the reorganized company;

• Other general unsecured creditors will receive a discounted cash payment or notes equal to the economic value of the equity being provided to the second-lien lenders, senior noteholders and Citrus Energy; and

• Existing equity in Warren will be cancelled, and holders will receive no further payments or recovery.

In connection with the bankruptcy filing, Warren obtained a commitment for $20 million in DIP financing. Wilmington Trust, NA is the DIP financing agent.

Interest will be Libor plus 1,100 basis points.

The facility will mature on Oct. 31.

According to court documents, Warren had $229.67 million in total assets and $545.17 million of total debt as of Jan. 31.

The company’s largest unsecured creditors are U.S. Bank NA of Houston, with a $179 million 9% senior notes claim and Cortland Capital Market Svcs, LLC of Chicago, with a $53.8 million second-lien term loan claim.

As previously reported, Warren Resources said in April that it was evaluating strategies to restructure its capital structure on an expedited basis, including the possibility of a bankruptcy filing, after creditor groups failed to reach a deal related to a proposal made by the company’s first-lien lender.

Warren elected to not make the $7.5 million interest payment due Feb. 1 on its unsecured senior notes.

The applicable 30-day grace period for the interest payment expired, triggering an event of default.

The notes default also resulted in events of default under the company’s first- and second-lien credit facilities.

The company is represented by Andrews Kurth LLP.

Warren is a New York-based energy company. The Chapter 11 case number is 16-32760.

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