Stone Energy locks in restructuring terms, eyes Chapter 11 filing

By Susanna Moon

Chicago, Oct. 21 – Stone Energy Corp. has inked a restructuring support agreement with some holders of its 1.75% senior convertible notes due 2017 and 7˝% senior notes due 2022.

Under the terms of the agreement, Stone Energy will file for voluntary relief under Chapter 11 of the U.S. Bankruptcy Code by Dec. 9 to implement the plan, according to a company announcement.

The company also secured a purchase and sale agreement for its properties in the Appalachia basin.

As announced Aug. 23, the company has been holding negotiations with a group of holders of the two series of notes and had outlined the terms of a proposal.

Noteholders of 85.4% of the notes have signed the restructuring support agreement, which exceeds the 66 2/3% needed in order for it to become effective, the company noted.

The restructuring agreement also required the company enter into the purchase and sale agreement for a cash purchase price of at least $350 million, and that condition also has now been met.

“The execution of the [restructuring agreement] is the culmination of months of hard work to right-size our balance sheet in response to a sustained period of low oil and natural gas commodity prices,” David Welch, the company’s chairman, president and chief executive officer, said in the release.

“The agreement with our noteholders will provide value to all of our stakeholders, improves our liquidity and better positions us to be profitable during a historically difficult time in our industry. Importantly, this agreement will allow all stakeholders to share in potential valuation growth if commodity prices improve.”

Restructuring proposal

Noteholders will receive their pro rata share of $150 million of proceeds from the sale of Stone's 86,000 net acres in the Appalachia regions of Pennsylvania and West Virginia plus 85% of proceeds from the sale of the properties in excess of $350 million, 95% of the common stock in reorganized Stone and $225 million of new 7˝% second-lien notes due 2022.

Existing shareholders of Stone will receive their pro rata share of 5% of the common stock in reorganized Stone and warrants for up to 15% of the post-petition equity exercisable upon the company reaching benchmarks under the terms of the proposed new warrants.

All claims of creditors with unsecured claims other than those by noteholders will be paid in full during the normal course of business. Stone said the unsecured claims are between $17 million and $27 million.

The company said it has been holding talks with the lenders under its revolving credit facility and has exchanged proposals for the treatment of the loans but that no agreement has been reached.

If the plan goes through, Stone said it expects to wipe out about $850 million principal of debt and to reduce its annual interest payment burden by about $46 million.

As previously announced, the company had begun providing an informal noteholders’ group with terms of a proposal on Aug. 8.

Stone Energy is a Lafayette, La., oil and gas exploration and production company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.