Southcross Holdings makes pre-packaged Chapter 11 bankruptcy filing

By Caroline Salls

Pittsburgh, March 28 – Southcross Holdings LP made a pre-packaged Chapter 11 bankruptcy filing Sunday in the U.S. Bankruptcy Court for the Southern District of Texas to implement a plan of reorganization that is expected to result in the elimination of almost $700 million of funded debt and preferred equity obligations and calls for a new equity investment from some existing equityholders.

According to a news release, the company expects to receive court approval to continue to pay all of its trade creditors, suppliers and contractors in the ordinary course of business, and any amounts owed to these parties will not be impacted by the Chapter 11 proceedings.

The company said Southcross Energy Partners, LP and its subsidiaries are not included in the bankruptcy filing, and their operations and employees, customers, suppliers, partners and other constituents are not affected. Southcross Energy Partners GP, LLC is also not a part of the proceedings.

As previously reported, Southcross launched a solicitation of votes for the plan on March 21. As of the morning of March 28, 100% of the votes that had been submitted in every voting class accepted the plan, meaning the company now has enough votes in both number and amount to carry every voting class under the plan.

The deadline to vote to accept the plan was 4 p.m. ET on March 28.

Restructuring terms

To fund operations during the bankruptcy proceedings, some of the company’s owners will provide up to $85 million of debtor-in-possession financing. An additional $85 million will be provided upon the effective date of the plan. Specifically, the plan sponsors are affiliates of EIG BBTS Holdings LLC and TW BBTS Aggregator LP.

In exchange for this $170 million investment, the owners will receive two-thirds of the equity of the reorganized holding company.

In addition to new equity in the reorganized company, Southcross said the sponsors will receive $8 million of unsecured notes.

General unsecured creditors, including vendors and trade creditors, are expected to be paid in full in cash or otherwise rendered unimpaired.

Creditor treatment

Treatment of creditors will include the following:

• Payment in full of all administrative and priority claims in cash at emergence;

• Conversion of the proposed DIP financing obligations to 33.33% of new equity;

• Reinstatement of all intercompany arrangements with the non-debtor Southcross Energy Partners entities;

• Holders of claims arising under the holding company’s revolving credit facility will receive their share of the loans arising under a new $50 million term loan A credit facility;

• Holders of claims arising under the company’s term loan will receive their share of 33.34% of the new equity and the loans arising under a new $75 million term loan B credit facility;

• Holders of general unsecured claims will recover 100%, to be paid in cash or other treatment that leaves the claims unimpaired;

• Class B unitholders will receive their share of $100,000; and

• All existing common equity interests in Southcross Holdings and Southcross Holdings GP will be canceled.

“Holdings believes that this process provides the swiftest and most efficient means to restructure its debt, bring its capital structure in line with current commodity prices and provide adequate liquidity to support operations and any funding requirements, including potential equity needs at Southcross,” the release said.

DIP financing

Wilmington Trust, NA is the administrative agent and collateral agent for the $85 million DIP facility.

The DIP loan will mature on the earliest of six months from the bankruptcy filing date, 45 days after entry of the interim order if a final order has not been entered, the effective date of a Chapter 11 plan, closing of a sale of the debtors’ assets, the date the company supports in writing any plan that does not call for payment in full of the loan obligations and the date of termination of the commitments and acceleration of the DIP loan obligations.

Interest will be 10%, payable in kind.

The company is seeking interim approval to access $32 million of the DIP financing.

Debt details

According to court documents, Southcross has $1 billion to $10 billion of both assets and debt.

The company’s largest unsecured creditor is Culberson Construction Inc. of Granbury, Texas, with a $1.08 million trade debt claim. No other unsecured creditors were listed with claims of $1 million or more.

The company is represented by Zack A. Clement PLLC.

Southcross is a Dallas-based midstream services company. The Chapter 11 case number is 16-20111.

© 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.