Shoreline Energy may solicit plan votes; confirmation hearing Feb. 10

By Caroline Salls

Pittsburgh, Jan. 6 – The disclosure statement for Shoreline Energy LLC’s Chapter 11 plan was conditionally approved on Jan. 5 by the U.S. Bankruptcy Court for the Southern District of Texas.

The order allows the company to begin soliciting plan votes on Monday. A combined hearing on plan confirmation and final approval of the disclosure statement will be held on Feb. 10.

As previously reported, under the restructuring support agreement, which followed negotiations with second-lien lender Highbridge Capital Management LLC and oil and gas hedging agreement party Morgan Stanley Capital Services LLC, Shoreline, the affiliates of Highbridge and the first-lien lenders agreed on the basic terms of a sale process for substantially all of the assets of the debtors and the terms of a plan of liquidation.

Specifically, a partnership will be established to serve as stalking horse bidder for the company’s core assets.

The purchaser’s capital structure will include a $40 million 4.5-year first-lien multi-draw term loan facility that will bear interest at a rate equal to Libor plus 700 basis points with a 1% Libor floor and carry a 2% original issue discount, a $35 million five-year second-lien term note, which will bear interest at Libor plus 600 bps with a 1% Libor floor, preferred A equity with zero coupon in the face amount of $60 million, preferred B equity with zero coupon in the face amount of $60 million and common equity.

Plan terms

Under the plan of liquidation, if the partnership is the high bidder for the assets, the debtor-in-possession financing agent will credit bid all of the outstanding obligations under the DIP credit agreement, satisfying those obligations in full. If an alternate transaction is completed, the DIP facility will be repaid in full in cash.

The first-lien agent will credit bid up to 100% of the credit facility claims to purchase designated assets. Any unsecured portion of the first-lien facility claims will be treated as general unsecured claims.

If an alternate transaction is completed, holders of first-lien facility claims will be paid in full in cash.

Holders of second-lien facility claims will retain liens attached to liquidating trust assets, and the claims will be paid from any remaining proceeds from the liquidation of those trust assets after payment of the costs of administration of the trust and the payment in full of all first-lien facility claims.

If an alternate transaction is completed, holders of second-lien facility claims will receive a share of cash from the sale of the core assets following payment of all administrative, priority, DIP facility and first-lien facility claims. Second-lien facility claims not paid in cash from an alternate transaction will be treated as general unsecured claims.

Holders of general unsecured claims will receive their share of any proceeds from the liquidation of the trust assets remaining after the payment of the costs of administering the trust and the payment in full of all first-lien and second-lien facility claims.

Existing equity interests will be cancelled, and holders will receive no distribution.

Houston-based Shoreline is a privately owned oil and gas exploration and production company The company filed bankruptcy on Nov. 2 under Chapter 11 case number 16-35571.

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