Following extensive negotiation with its key creditors, Basic's Plan has the support of 100% of its secured term loan lenders and holders of over 80% of the outstanding 2019 Notes and 2022 Notes. In addition, the agent for the Company's secured asset-based lenders, although not a party to the RSA, has been involved in the negotiations regarding the Plan.
Roe Patterson, Basic's President and Chief Executive Officer, commented, "After careful consideration, we have taken this difficult but necessary step to secure a bright future for Basic Energy Services. This process is about fixing our capital structure for the long-term to benefit all of our stakeholders.
"The sharp and prolonged period of depressed commodity prices have created poor operating conditions in the field and significantly reduced our operating cash flow. The actions we have taken, combined with the support of our existing lenders, will help us strengthen our balance sheet and position Basic for a sustainable future to benefit from what we anticipate will be an eventual recovery in oil and natural gas prices.
"During this process, we anticipate meeting all of our ongoing obligations to suppliers, customers, employees, and others, as usual, and we will continue to provide our customers with dependable, high-quality services, which is the hallmark of our Company.
"The fundamentals of the business are strong and having access to new capital will enable us to strengthen our current business lines, grow organically as opportunities develop and participate in potential merger and acquisition activities in the future."
Upon effectuation, the consensual financial restructuring would, among other things:
- Amend and restate the terms of the Company's prepetition term loan outstanding in the principal amount of approximately
$165 millionto provide for more flexible covenants.
- Cancel over
$800 millionof principal and accrued interest in outstanding Unsecured Notes. In exchange, holders of the Unsecured Notes (collectively, the "Noteholders") will receive 99.5% of reorganized Basic's equity as of the effective date of the Plan (the "Effective Date") (which will be 51.2% of the total outstanding equity in reorganized Basic upon conversion of the mandatorily convertible notes assuming such conversion occurs 36 months after the Effective Date) and eligible existing Noteholders will have the opportunity to participate in a rights offering for $125 millionof new mandatorily convertible unsecured notes. This new capital commitment will be backstopped pursuant to an agreement to be entered into by certain supporting Noteholders.
- Pay all undisputed customer, employee, vendor and other trade obligations in full in the ordinary course.
- Provide the Company's existing shareholders with a recovery in the form of 0.5% of reorganized Basic's equity on the Effective Date (which will be 0.26% of the total outstanding equity in reorganized Basic upon conversion of the mandatorily convertible notes assuming such conversion occurs 36 months after the Effective Date) and 7-year warrants to acquire an additional 6% of total outstanding equity in reorganized Basic (after giving effect to the conversion of the mandatorily convertible notes).
Reorganized Basic equity issued under the management incentive plan and upon exercise of the warrants will further dilute the equity recovery for Noteholders and existing shareholders described above.
All aspects of the Plan remain subject to Bankruptcy court approval and the satisfaction of conditions set forth in the Plan.
In further support of the restructuring, the Company's secured term lenders and certain of its Noteholders have committed to provide up to
The Company is in active discussions with potential lenders to find a replacement for its prepetition
Today, Basic commences solicitation on the Plan. Votes on the Plan must be received by Epiq Corporate Restructuring, the Company's voting agent, by
The Company recommends that its creditors, including Noteholders, refer to the information in the Company's Disclosure Statement, which attaches a copy of the Plan. Information contained in the Disclosure Statement is subject to change, whether as a result of amendments, actions of third parties or otherwise.
This press release is for information purposes only and is not a solicitation to accept or reject the Plan referred to herein or an offer to sell or a solicitation of an offer to buy any securities of the Company. Any solicitation or offer to sell will be made pursuant to and in accordance with the Disclosure Statement distributed to Noteholders and applicable law.
More detailed information on the restructuring can be found in the RSA which will be included with a Form 8‐K being filed with the
Safe Harbor Statement
This release includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the status of the negotiations and our liquidity. Basic has made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, including (i) changes in demand for our services and any related material impact on our pricing and utilizations rates, (ii) Basic's ability to execute, manage and integrate acquisitions successfully, (iii) changes in our expenses, including labor or fuel costs and financing costs, (iv) continued volatility of oil or natural gas prices, and any related changes in expenditures by our customers, (v) competition within our industry, (vi) Basic's ability to comply with its financial and other covenants and metrics in its debt agreements, as well as any cross-default provisions, and (vii) (vii) Basic's ability to obtain approval by the
Alan Krenek, Chief Financial Officer
Basic Energy Services, Inc.
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