Halcon enters $600 million exit facility; Chapter 11 plan takes effect

By Wendy Van Sickle and Caroline Salls

Columbus, Ohio, Sept. 9 – Halcon Resources Corp. entered into a $600 million exit senior secured reserve-based revolving credit facility on Friday, the same day its pre-packaged plan of reorganization took effect, according to an 8-K filing with the Securities and Exchange Commission.

The plan was confirmed on Thursday by the U.S. Bankruptcy Court for the District of Delaware.

The exit facility was led by JPMorgan Chase Bank, NA, Wells Fargo Securities, LLC, Barclays Bank plc and BMO Capital Markets as joint lead arrangers and joint bookrunners. JPMorgan Chase is the administrative agent.

As part of the reorganization plan, the company’s financing facility under its debtor-in-possession revolving credit agreement dated as of Aug. 1 was converted into the new exit facility.

The exit facility matures on the earlier of July 28, 2021 and the 120th day prior to the Feb. 1, 2020 maturity of the company’s 2020 second-lien notes, if such notes have not been refinanced, redeemed or repaid in full on that day.

Loans under the credit agreement bear interest at Libor plus an applicable margin of 275 basis points to 375 bps, based on the borrowing base utilization percentage.

The credit agreement contains some financial covenants including a maximum total net indebtedness leverage ratio of 4.75 times, stepping down to 4.5 times on Sept. 30, 2017 and to 4 times on March 31, 2019.

Amounts outstanding under the credit agreement are guaranteed by certain of Halcon’s direct and indirect subsidiaries and secured by a security interest in substantially all of the assets of the company and its subsidiaries.

Plan terms

As previously reported, under the pre-packaged restructuring plan, the company will eliminate $1.8 billion in long-term debt and reduce annual interest expense by more than $200 million.

Also under the plan, holders of Halcon common stock will receive 4% of the common stock of the reorganized company, subject to dilution.

Senior secured revolving credit facility lenders will receive a new or amended reserve-based facility provided by existing lenders.

Second-lien notes will be unaffected and reinstated.

Specifically, the company will have $700 million of 8 5/8% second lien notes due 2020 and $113 million of 12% second lien notes due 2022.

Third-lien notes will be fully equitized into 76½% of common equity, and holders will also receive $33.8 million of cash plus accrued interest through May 15.

The equitization eliminates $1,018,000,000 of 13% third lien notes due 2022.

Holders of unsecured notes will receive 15½% of the common equity, warrants for 4% of the common equity with a four-year term and an exercise price based on a $1.33 billion equity value and $37.6 million of cash plus accrued interest through May 15.

The restructuring eliminated $316 million of 9¾% senior notes due 2020, $297 million of 8 7/8% senior notes due 2021 and $37 million of 9¼% senior notes due 2022.

Holders of the company’s $290 million of convertible notes due 2020 will receive 4% of the common equity, $15 million of cash and warrants for 1% of the common equity with a four-year term and an exercise price based on a $1.33 billion equity value.

Holders of the $222 million of preferred equity will receive $11.1 million of cash.

Vendors, royalty owners and other parties were expected to be paid throughout the bankruptcy process.

On the effective date, the company issued 3,600,002 shares of common stock to existing common stockholders, 68.85 million shares to third-lien noteholders, 13.95 million shares to unsecured noteholders and 3.6 million shares to convertible noteholders.

In addition, Halcon issued 3,789,474 warrants to the unsecured noteholders, and 947,368 warrants to the convertible noteholder.

Ares Management LLC, together with any funds or managed accounts affiliated with, or managed by, Ares, owns about 20% of the common stock of the company, and Franklin Advisers, Inc., as investment manager on behalf of some funds and accounts, owns roughly 38% of the common stock.

Incentive plan

Halcon said its existing board of directors adopted a 2016 long-term incentive plan, which took effect along with the plan. A total of 10 million shares of common stock are available to be granted under the incentive plan in the form of non-qualified stock options, incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance units, performance bonuses, stock awards and other incentive awards.

Management changes

In accordance with the restructuring plan, the terms of the members of Halcon’s previous board of directors expired, and a new board was appointed.

The members of the new board include Floyd Wilson, Jim Christmas, Tom Fuller, Nate Walton, Darryl Schall, Eric Takaha, Michael Clark, Ronald Scott and William Campbell.

Ares and Franklin each designated three of the new members of the board of directors.

The board also approved the appointment of Floyd C. Wilson to the office of president. Wilson will also continue to serve as chairman and chief executive officer.

Wilson is assuming responsibility as president from Stephen W. Herod, who was appointed to the office of executive vice president, corporate development. In addition, Jon C. Wright was appointed executive vice president, operations.

Based in Houston, Halcon is an independent energy company focused on onshore oil and natural gas exploration. The company had filed bankruptcy on July 27 under Chapter 11 case number 16-11724.

© 2015 Prospect News.
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