By Stephanie Gleason Stock Market Quotes, Business News, Financial News from http://commodity-market-news.com
Oil and gas producer Midstates Petroleum Corp. received a bankruptcy judge’s permission Thursday to begin polling creditors on its bankruptcy-exit plan, a plan based on a support agreement negotiated prior to the company’s bankruptcy filing.
The permission from Judge David Jones of the U.S. Bankruptcy Court in Houston came over the objection of the committee of unsecured creditors, which argued that the plan is “patently unconfirmable” and shouldn’t go to a vote.
Although Judge Jones overruled the objection, he made clear that the committee could make the arguments again when he considers whether to confirm the plan. The permission Thursday approves Midstates’ so-called disclosures statement, a document that a judge must approve as having adequate information to allow creditors to make an informed vote.
“Nothing that I have heard has changed my initial assessment of where we are today,” Judge Jones said. “I have read the disclosure statement. I think it has made a good effort to put forward the status of a complicated situation.”
The oil and gas producer filed for bankruptcy in May with a plan to reduce its debt by 90% by handing more than 96% ownership of the company to junior bondholders owed $625 million, in exchange for forgiveness of that debt. That group of junior bondholders will also be entitled to as much as $60 million in cash. Lenders of its $249.2 million senior revolving facility are being paid $82 million in cash and have agreed to provide a $170 million exit facility to Midstates.
Representing Midstates, William Guerrieri of Kirkland & Ellis LLP, said the plan has “overwhelming support” from creditor groups but acknowledged that it was negotiated prior to the formation of the committee of unsecured creditors.
As a result, “the debtors went forward with the people that were in the room with them,” he said of the negotiation process. However, allowing a vote to move ahead on the plan wouldn’t prevent further negotiations, he said.
Lower-ranking debtholders are slated to have their debts wiped away and be paid with small equity stakes. Third-lien bondholders owed $529.7 million, which rank below the company’s junior debt, will receive 2.5% equity in the restructured company plus warrants to purchase an additional 15% stake in the months following Midstates’ bankruptcy exit. Unsecured bondholders owed more than $641 million and general unsecured creditors will share a 1.2% equity stake.
Midstates, which has headquarters in Houston and Tulsa, Okla., was founded in 1993 as a Gulf Coast onshore driller and now focuses on hydraulic fracturing of natural-gas formations. Leading up to its bankruptcy filing, Midstates attempted to increase liquidity with fresh debt offerings and bond exchanges, but it wasn’t enough to allow the company to weather these commodity prices.
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