Warren Resources skips coupon on 9% notes, begins restructuring talks

By Susanna Moon

Chicago, Feb. 1 – Warren Resources, Inc. said it will forgo making the semiannual interest of about $7.5 million due Feb. 1 on its $167.3 million principal amount of 9% senior notes due 2022, which could potentially trigger a default under its bank loans.

Warren has decided to skip making the coupon payment despite having the liquidity to do so, and the failure to pay the coupon within 30 days would become an event of default under the note terms, according to a company news release.

Upon an event of default, the trustee or holders of at least 25% principal amount of the notes then outstanding may declare the principal amount plus accrued interest due and payable, the company noted.

The company’s failure to pay interest on the notes within the 30-day grace period would also result in events of default under Warren’s first-lien credit facility and second-lien credit facility, which would allow the administrative agents and lead lenders to declare all obligations to be immediately due and payable.

Warren said it has hired Jefferies LLC as financial adviser for a potential restructuring of its balance sheet and has begun restructuring talks with representatives of the creditors under the credit facilities.

“Based on positive discussions with secured lenders, and with approval from our board of directors, we have made the strategic decision to defer the Feb. 1 interest payment on our unsecured notes in anticipation of beginning a similarly constructive dialogue with our unsecured noteholders,” James A. Watt, Warren’s president and chief executive officer, said in the press release.

“Our substantial cash position allows us to continue to meet all of our obligations to pay suppliers, employees and others, and to continue to fund our operations.

“We look forward to using the interest payment grace period to begin discussions aimed at achieving an improved capital structure that, in light of challenging commodity prices, would be viable in the long term and in the best interests of all of Warren’s stakeholders, including our creditors, equity holders and employees.”

The energy company is based in New York.

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