Knight Energy files bankruptcy; lenders agree to support restructuring

By Caroline Salls

Pittsburgh, Aug. 9 – Knight Energy Holdings, LLC made a pre-negotiated Chapter 11 filing Aug. 8 in the U.S. Bankruptcy Court for the Western District of Louisiana to implement a restructuring support agreement reached with debtholders representing more than 87% of its senior secured credit facility due 2018, according to a news release.

The company said it intends to move quickly to present its plan of reorganization to the court and seek confirmation of the plan.

Knight said the support agreement provides for a substantial deleveraging transaction under which it will meaningfully improve its balance sheet by equitizing more than $175 million of its existing secured obligations and will substantially bolster its liquidity position through an exit financing facility.

Plan terms

Under the proposed plan, the company will establish a new first-lien credit facility, including first-lien takeback notes and a first-lien revolving credit facility.

In addition, the company will sell non-core assets or property securing loans held by mortgage holders.

Knight’s JPMorgan and Iberia loans will be repaid from the net sale proceeds.

In addition, the company will restructure or replace the JPMorgan and Iberia loans in full or in part with new takeback loans.

The company will establish a $1 million fund to allow for payments to holders of general unsecured claims.

Claims arising from the provision of goods and services will be fully satisfied.

A comprehensive settlement distribution will also be made to consenting debtholders.

Also under the plan support agreement, reorganized Knight will issue new membership interests in either a newly established holding company or one of the reorganized debtors.

All of the new equity interests will be distributed to the senior credit facility lenders, subject to dilution by the settlement distribution and a management incentive plan.

Under the comprehensive settlement, consenting holders will receive 20% of the new equity and two classes of five-year warrants entitling them to 7% of the equity with an exercise price equal to a $120 million valuation and 6% of the equity with an exercise price equal to a $175 million valuation.

Effect of downturn

“Like many leading oil and gas companies, we have been affected by the ongoing downturn in the market,” the Knight family said in the release.

“The company has spent considerable time since then focusing on how to best serve our customers, employees, and to maintain strong relations with our vendors and employees.

“In order to best position our company for the future, we felt that a financial restructuring was necessary and worked with our stakeholders to achieve a consensual plan to deleverage the company and position Knight and our employees for success.

“Together we have developed a long term strategic plan that will allow Knight to continue to be a market leader.”

The company said it will continue to operate during the proceeding. Knight intends to continue to pay employee wages, salaries and benefits and will work to ensure that all customer programs will remain unchanged, the release said.

DIP financing

Knight said it obtained a commitment for $14.5 million in debtor-in-possession financing, which is expected to provide the company with liquidity to support the business during the Chapter 11 proceeding.

Cantor Fitzgerald Securities is the administrative and collateral agent.

Interest will accrue at a fixed rate of 8½%.

The DIP facility will mature on the earliest of Jan. 31, Aug. 10 if the court has not entered an interim order by that date, Sept. 1 if the final order has not been entered, the effective date of a Chapter 11 plan, the closing of a sale of all or substantially all of the company’s properties and the acceleration of the loans.

Debt details

According to court documents, Knight has $50 million to $100 million in assets and $100 million to $500 million in debt.

Specifically, Knight said its combined secured debt obligations totaled roughly $200 million as of Aug. 7, including $180.6 million in principal secured debt under a senior credit facility, $8.5 million in principal secured debt under five notes and $11.2 million in principal secured debt under another note.

The company did not list any unsecured creditors with claims of $1 million or more.

Heller Draper is acting as lead restructuring counsel, a representative from Opportune is serving as the company’s chief restructuring officer, and Farlie Turner has served as financial adviser.

Knight is a Lafayette, La., oilfield rental tool company. The Chapter 11 case number is 17-51014.

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