Key Energy emerges from bankruptcy; stock to begin trading Dec. 16

By Caroline Salls

Pittsburgh, Dec. 15 – Key Energy Services, Inc. emerged from bankruptcy on Thursday, according to a company news release.

As previously reported, the company’s plan of reorganization was confirmed on Dec. 6 by the U.S. Bankruptcy Court for the District of Delaware.

The company said reorganized Key Energy received approval to list its new common stock on the New York Stock Exchange in conjunction with its emergence, and trading in its common stock was expected to begin on Dec. 16 under the ticker symbol “KEG.”

“We could not be more pleased to be emerging from our bankruptcy process in such an expeditious fashion and to concurrently re-list Key’s new common shares on the New York Stock Exchange,” Key president and chief executive officer Robert Drummond said in the release.

Platinum Equity previously held a majority of Key’s senior notes and is now the company’s largest shareholder.

According to the release, about $694 million of the company’s long-term debt has been eliminated in the reorganization along with more than $45.6 million of annual interest expense going forward.

Stock allocation

Holders of Key common stock are entitled to receive 5% of the new common stock of the reorganized company.

The remaining 95% of the new common stock is being allocated to Key’s noteholders, subject to dilution by new common shares reserved for issuance under a management incentive program and warrants issued to some existing equityholders under the plan.

In addition, qualified pre-bankruptcy holders of Key common stock received rights to participate in up to 5% of a rights offering, and some pre-bankruptcy debtholders received rights to participate in up to 95% of the rights offering.

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

Plan terms

In addition to the rights offering, the other principal components of the plan include replacing the company’s existing $100 million asset-based revolving credit facility with a new ABL facility and exchanging 100% of the 6¾% notes for 5 million shares of reorganized Key plus rights to acquire additional shares of reorganized Key.

Bank of America, NA is the administrative agent for the new facility, and Bank of America and Wells Fargo Bank, NA are co-collateral agents.

The company said in an 8-K filed with the Securities and Exchange Commission that the ABL facility provides for initial commitments from the ABL lenders of $80 million and matures on June 15, 2021.

Borrowings under the ABL facility will bear interest at a rate ranging from Libor plus 250 basis points to Libor plus 450 bps, depending on the company’s fixed-charge coverage ratio, or a rate ranging from Base rate plus 150 bps to Base rate plus 350 bps.

The company said it expects to have 20.1 million new common shares outstanding before dilution from the incentive plan and new warrants.

The company said it entered into a warrant agreement with American Stock Transfer & Trust Co. LLC and issued two series of warrants to the former holders of its common stock. One series of warrants will expire on the close of business on Dec. 15, 2020 and the other on the close of business on Dec. 15, 2021.

Each warrant is exercisable for one share of reorganized Key’s common stock. As of the effective date, there were 919,090 four-year warrants outstanding to purchase up to 919,090 shares at an initial exercise price of $43.52 per share and 919,090 five-year warrants outstanding to purchase up to 919,090 shares at an initial exercise price of $54.40 per share.

The company said it also entered into a term loan and security agreement with agents Cortland Capital Market Services LLC and Cortland Products Corp. that provides for $250 million of term loans to be issued to the existing term lenders in accordance with the plan.

The term loan facility will mature on Dec. 15, 2020 and will bear interest at Libor plus 1,025 bps or the Base rate plus 925 bps.

Growth prospects

Platinum Equity partner and newly appointed Key board member Jacob Kotzubei said he is excited about Key’s prospects for growth.

“Key Energy is a market leader in North American production services and stands today as a stable, well-capitalized business with a great future,” Kotzubei said in the release.

“The company is an ideal platform to grow organically and through prospective add-on acquisitions.”

Key was represented in its restructuring by Sidley Austin LLP. Sullivan & Cromwell LLP represented Platinum Equity as well as some other holders of Key’s senior notes, who were also represented by Cleary Gottlieb Steen & Hamilton LLP.

Key Energy is Houston-based onshore, rig-based well servicing contractor. The company filed bankruptcy on Oct. 24 under Chapter 11 case number 16-12306.

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