Lilis Energy files bankruptcy under dual-track plan or sale process

By Caroline Salls

Pittsburgh, June 29 – Lilis Energy, Inc. made a pre-packaged Chapter 11 bankruptcy filing Sunday in the U.S. Bankruptcy Court for the Southern District of Texas in line with a restructuring support agreement, according to a company news release.

The support agreement was reached with investment funds and entities affiliated with Varde Partners, Inc., which collectively own all of the company’s outstanding preferred stock, a subordinated portion of the debt outstanding under the company’s senior secured revolving credit facility and a portion of the company’s common stock and all other lenders under the credit agreement.

Support agreement

Under the support agreement, Lilis and its subsidiaries, the RBL lenders and the Varde funds have agreed to support a plan of reorganization that is expected to reduce the company’s funded debt obligations by more than $34.9 million, and right-size its bank debt for future operations.

Shares of Lilis’ common stock will be cancelled for no consideration under the plan.

The company said it expects to continue to operate in the ordinary course throughout the restructuring process without significant disruption to vendors, suppliers and partners.

The plan is contingent upon the Varde funds’ election to provide, on or before Aug. 17, an agreed equity commitment and provision of additional debtor-in-possession financing.

If the Varde funds elect not to provide DIP financing and to make the equity investment or the plan based on the support agreement is not otherwise pursued, Lilis will instead pursue an agreed asset sales process.

If the reorganization plan is completed under the dual-track process, the company said the plan has the potential to pay general unsecured creditors in full.

“Like many companies in the oil and gas industry, we have been impacted by the severe downturn in commodity prices throughout the Covid-19 pandemic,” chief executive officer, president and chief financial officer Joseph C. Daches said in the release.

“We are pleased to receive the continued support of our lenders and preferred shareholders and are confident that Lilis Energy can emerge from Chapter 11 better positioned to meet the challenges that have faced us.”

DIP financing

With the filing, the company said it has received a commitment from its bank lenders to provide up to $15 million in new-money DIP financing. The financing package also includes a $15 million roll-up of pre-bankruptcy loans.

BMO Harris Bank, NA is the DIP financing agent.

The financing will mature five months from the DIP credit agreement execution date.

Interest on new-money loans will accrue at Libor plus 650 basis points, and interest on roll-up loans will accrue at Libor plus 550 bps.

Togethering with its usual operating cash flows, Lilis said the financing is expected to provide sufficient liquidity for it to continue to operate in the ordinary course through the restructuring process.

Up to $5 million of the DIP financing is expected to be available on an interim basis.

Debt details

According to court documents, Lilis had $258.6 million in total assets and $251.23 million in total debt as of Dec. 31.

The company’s largest unsecured creditors are Elite Well Services, LLC of Artesia, N.M., with a $2.84 million trade claim; War Horse Resources, LLC of Oklahoma City, Okla., with a $1.99 million trade claim; and Helmerich and Payne International Drilling of Tulsa, Okla., with a $1.39 million trade claim.

Vinson & Elkins LLP is serving as legal adviser to the company, Barclays Capital is serving as investment banker for the Company, and Opportune LLP is serving as restructuring adviser.

On Saturday, Markus Specks resigned as a director of the company. Under their rights as holders of the company’s outstanding preferred stock, the Varde funds named Varde Partners, Inc. managing director Nicholas Winter as his replacement.

Lilis is a Fort Worth-based independent oil and gas exploration and production company that operates in the Permian’s Delaware Basin. The Chapter 11 case number is 20-33274.

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