Key Energy Services’ pre-packaged plan of reorganization confirmed

By Caroline Salls

Pittsburgh, Dec. 6 – Key Energy Services, Inc.’s pre-packaged plan of reorganization was confirmed Tuesday by the U.S. Bankruptcy Court for the District of Delaware.

Tuesday’s order also approved the disclosure statement related to the plan.

As previously reported, the company’s plan and rights offering are based on the restructuring transactions contemplated by the plan support agreement among Key Energy, some of its subsidiaries, Platinum Equity Advisors, LLC, other holders of the company’s 6¾% senior notes due 2021 and some lenders under its term loan.

In the rights offering, qualifying holders of the company’s notes and qualifying equity holders will have the right to purchase up to 7,022,859 shares of the reorganized company’s common stock at a price of $12.10 per share for total gross proceeds of up to $85 million. This amount may be increased by up to $25 million through the sale of additional shares at a price ranging from $6.86 to $8.94 per share, based on the expected pro forma liquidity of the reorganized company as of the effective date of the plan.

The company entered into a backstop agreement under which the backstop participants agreed to participate in the rights offering and to backstop the full amount of the rights offering. In exchange for their commitments, the closing backstop participants will receive a premium on the plan effective date in the form of shares of the reorganized Key common stock.

Proceeds from the rights offering will be used to repay principal and interest on the term loan to reduce the principal balance to $250 million and provide reorganized Key with incremental working capital.

In addition to the rights offering, the other principal components of the plan include the following:

• Replacing the company’s existing $100 million asset-based revolving credit facility with a new ABL facility;

• Exchanging 100% of the 6¾% notes for 5 million shares of reorganized Key plus rights to acquire additional shares of reorganized Key; and

• Cancelling all of the company’s existing common stock in exchange for 543,927 shares of reorganized Key plus rights and warrants to acquire additional shares of reorganized Key.

The company expects that the noteholders will own about 95% of reorganized Key’s common stock, and Key’s current common equity holders will own about 5% once the plan becomes effective.

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