Seventy Seven Energy to swap $1.1 billion of debt via bankruptcy case

By Caroline Salls

Pittsburgh, June 7 – Seventy Seven Energy Inc. made a pre-packaged Chapter 11 bankruptcy filing Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

According to a company news release, Seventy Seven’s pre-packaged plan of reorganization provides for a substantial deleveraging transaction under which $1.1 billion of its outstanding debt will be converted to equity.

As previously reported, the restructuring plan includes the following:

• Trade creditors and other general unsecured creditors will be paid in full;

• The $650 million of 6 5/8% notes will be exchanged into 96.75% of the company’s new common stock;

• The $450 million of 6½% notes due 2022 will be exchanged for 3.25% of the new common stock plus warrants exercisable for 15% of the new common stock at predetermined equity values;

• If all classes of claims entitled to vote accept the plan, holders of existing common stock will receive two series of warrants exercisable for 20% of the new common stock at predetermined equity values;

• The company’s existing $400 million secured term loan will be reinstated on identical terms; and

• A consent fee will be paid to term loan holders equal to 2% of the incremental term loan plus $15 million of the outstanding incremental term loan balance, together with the reinstatement of the remaining $84 million balance of the incremental term loan on identical terms other than the suspension of any prepayment premium for a period of 18 months.

The Chapter 11 reorganization is expected to conclude within 60 days.

Plan support

Seventy Seven said it received “overwhelming approval” of the plan from its incremental tranche A term supplement lenders, term loan credit agreement lenders, holders of its 6 5/8% senior notes due 2019 and holders of its 6½% senior notes due 2022.

“The support of all of our stakeholders will allow our company to expedite the reorganization process and maximize our operational strengths and assets to grow our business as the market recovers,” chief executive officer Jerry Winchester said in the release.

DIP financing

In conjunction with the bankruptcy filing, the company obtained a commitment for $100 million of debtor-in-possession financing.

Wells Fargo Bank, NA is the administrative agent, collateral agent and lead arranger and bookrunner.

The DIP facility will mature on the earliest of nine months from the bankruptcy filing date, 30 days after entry of the interim order if a final order has not been entered, the occurrence of an exit facility conversion date or the effective date of a plan of reorganization and the acceleration of the loans or termination of the commitments.

Interest will be based on excess monthly availability. For base rate loans, interest will range from the base rate plus 150 basis points to the base rate plus 200 bps. For Libor loans, the rate will range from Libor plus 250 bps to Libor plus 300 bps.

Debt details

Seventy Seven said in court documents that it had $1,779,584,902 of total assets and $1,725,555,944 of total debt as of April 30.

The company’s largest unsecured creditors are

• Indenture trustee the Bank of New York Mellon Trust Co., NA of Chicago, with a $650 million 6 5/8% notes claim;

• Indenture trustee Wells Fargo Bank, NA of Dallas, with a $450 million 6½% notes claim;

• Nalco Co. of Naperville, Ill., with a $10.78 million trade payable claim;

• National Oilwell Varco US Rig of Houston, with a $3.06 million trade payable claim;

• Simons Petroleum LLC of Oklahoma City, with a $3.01 million trade payable claim; and

• Woolslayer Cos. Inc. of Tulsa, Okla., with a $1.04 million trade payable claim.

Icahn Capital LP owns 8.1% of the company’s voting securities, and BlackRock Inc. owes 4.6%.

According to an 8-K filed with the Securities and Exchange Commission, the bankruptcy filing constitutes an event of default on the notes, the term loan and the incremental loan. However, attempts to enforce default-related rights are automatically stayed by the Chapter 11 filing.

The company is represented by Morris, Nichols, Arsht & Tunnell LLP.

Based in Oklahoma City, Seventy Seven provides wellsite services and equipment to U.S. land-based exploration and production customers. The Chapter 11 case number is 16-11409.

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