Stone Energy pre-packaged plan of reorganization takes effect Feb. 28

By Caroline Salls

Pittsburgh, March 1 – Stone Energy Corp.’s second amended joint pre-packaged plan of reorganization took effect on Tuesday, according to a news release.

The plan was confirmed on Feb. 15 by the U.S. Bankruptcy Court for the Southern District of Texas.

Under the plan, pre-bankruptcy unsecured noteholders are receiving 19 million new common shares, representing 95% of the new shares.

Pre-bankruptcy stockholders are receiving 1 million new common shares, or an equivalent of a one-for-5.674558 reverse stock split, representing 5% of the new common shares.

The stockholders are also receiving warrants to purchase 3.53 million new common shares, or 3.529412 warrants for each new common share.

The warrants have an exercise price of $42.04 per share and a term of four years.

Incentive plan

Stone said each of the common equity percentages in the reorganized company is subject to dilution from the exercise of the warrants and a management incentive plan.

A total of 2.61 million shares were authorized under the incentive plan, but the company said it issued no shares on the plan effective date.

The authorized shares may be issued under the plan in the future at the discretion of Stone’s board of directors.

The new common shares were scheduled to begin trading on the New York Stock Exchange under the ticker symbol SGY at the open of trading hours on March 1. The warrants will not be listed on an exchange at this time, but the company said it expects to list them on an exchange by the end of March.

Upon emergence from bankruptcy, Stone said it eliminated $1.2 billion in principal amount of outstanding debt, resulting in remaining debt outstanding of about $236.3 million.

Credit facility terms

The company said it had no outstanding borrowings and outstanding letters of credit of $12.5 million under its $200 million reserve-based revolving credit facility, which carries a borrowing base availability of $150 million until Nov. 1, 2017.

The facility is scheduled to mature on Feb. 28, 2021 and will accrue interest at a rate of Libor plus 300 basis points to 400 bps for Libor loans and Base rate plus 200 bps to 300 bps for base rate loans, based on borrowing base utilization.

In addition, the company will issue $225 million of 7˝% senior second-lien notes due 2022 under the plan.

Stone said cash interest payments on the notes will begin on Nov. 30, 2017.

The company may redeem up to 35% of the total principal amount of the new notes any time before May 31, 2020 at a price of 107.5%, provided that at least 65% of the total principal amount of the new notes remains outstanding after each redemption.

On or after May 31, 2020, the company may redeem all or part of the new notes at redemption prices equal to 105.625% for the 12-month periods beginning on May 31, 2020 and May 31, 2021; and par for the 12-month period beginning May 31, 2022. In addition, at any time before May 31, 2020, the company may redeem all or a part of the new notes at par plus a make-whole premium.

Stone said it has about $150 million of cash on hand and $75 million of cash held in a restricted account to satisfy near-term plugging and abandonment liabilities.

New board

As of the effective date, the terms of the company’s previous board of directors expired, and a new board was appointed. The new directors are Neal P. Goldman, John “Brad” Juneau, David Rainey, Charles M. Sledge, James M. Trimble, David N. Weinstein and David H. Welch.

According to an 8-K filed with the Securities and Exchange Commission, the standing committees of the new board of directors will be comprised of non-employee directors and consist of an audit committee, compensation committee, nominating and governance committee, reserves committee and safety committee.

Stone Energy is a Lafayette, La., oil and gas exploration and production company. The company filed for bankruptcy on Dec. 14 under Chapter 11 case number 16-36390.

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