Pioneer Energy pre-packaged plan of reorganization confirmed by court

By Caroline Salls

Pittsburgh, May 11 – Pioneer Energy Services Corp.’s pre-packaged plan of reorganization was confirmed Monday by the U.S. Bankruptcy Court for the Southern District of Texas.

As previously reported, Pioneer filed bankruptcy to implement a financial restructuring agreement reached with key stakeholders that includes the elimination of its existing notes through a debt-for-equity conversion.

The company said its balance sheet restructuring will significantly reduce long-term debt and related interest costs, provide access to additional financing and establish a strong capital structure. In addition to equitizing roughly $300 million of existing notes, the company will raise up to $125 million of new capital through a rights offering of new convertible debt from eligible noteholders and shareholders, a substantial portion of which will be backstopped by existing holders, and $78 million of new senior secured notes to be provided by existing noteholders.

Upon emergence, this new capital will be used to refinance Pioneer’s existing term loan debt, make distributions under the plan and add cash to the balance sheet.

Under the pre-packaged plan, general unsecured creditors will be paid in full in the ordinary course of business.

The company’s existing asset-based revolving credit facility will be refinanced with a debtor-in-possession revolver with a borrowing limit of $75 million and a $30 million letter-of-credit facility.

The company will issue a total of $78.12 million in new senior secured notes to some consenting noteholders. The new secured notes will mature five years from issuance and bear cash interest at Libor plus 950 bps, plus a 100 bps step-up if the notes remain outstanding in year five.

Existing senior unsecured notes will be cancelled and exchanged for 94.25% of the common stock of reorganized Pioneer and the right to participate in a rights offering for the purchase of 94.25% of the unsecured convertible bonds to be issued by reorganized Pioneer along with stapled special voting stock.

Up to $123.2 million of new convertible bonds will be issued, and 9.2 million shares of stapled special voting stock will be issued.

The existing secured term loan facility will be refinanced with the proceeds of the new convertible bonds and the new secured notes.

Existing equity will be canceled and exchanged for 5.75% of the new equity, subject to the class of holders of existing equity voting to accept the plan, and the right to participate in the rights offering for the purchase of 5.75% of the new convertible bonds and stapled special voting stock.

The consenting noteholders have committed to backstop $118 million of new convertible bonds and the corresponding shares of stapled special voting stock, and some members of Pioneer’s senior management will purchase $1.8 million of new convertible bonds and corresponding shares.

The new convertible bonds will mature in 5.5 years from issuance and bear payable-in-kind interest at 5%. Up to 10.1 million stapled special voting shares will be issued.

The new convertible bonds will be convertible into 75 shares of new equity per $1,000 principal amount of the new bonds at any time in whole or in part at the option of the holder and mandatorily on the maturity date.

Pioneer Energy is a San Antonio-based drilling services company. The company filed bankruptcy on March 1 under Chapter 11 case number 20-31425.

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