By December 16, 2015 Read More →

Magnum Hunter Resources files for Chapter 11 bankruptcy protection

Agreement provides for debtor-in-possession financing in form of a $200 million senior secured multi-draw term loan

Magnum Hunter

Magnum Hunter Resources

Magnum Hunter Resources Corporation and its subsidiaries filed for bankruptcy protection Tuesday, saying it has the support of its lenders to restructure debt.

The company has a restructuring support agreement with lenders that hold approximately 75 per cent in principal amount of its debt (substantially all of the first lien debt, about 66.5% of the second lien debt, and 79% of the senior unsecured notes).

CEO Gary C. Evans believe the restructuring will be a success and “unprecedented in our industry.”

“I believe this restructuring will position Magnum Hunter as a market leader in the upstream sector with an ideal capital structure to capitalize on the large number of opportunities anticipated in our industry due to the precipitous commodity cycle downturn affecting the industry as a whole,” he said in a release.

The agreement provides for the debt-to-equity conversion of substantially all of Magnum Hunter’s pre-petition funded indebtedness and 100 per cent of the post-petition debtor-in-possession financing.

Magnum Hunter expects to emerge from chapter 11 bankruptcy process in April, 2016 and says the restructuring “contemplates a significant cash recovery to vendors and trade claimants.”

The agreement provides for debtor-in-possession financing in the form of a $200 million senior secured multi-draw term loan that will be backstopped by lenders who are parties to the restructuring support agreement. Management expects the DIP financing will provide sufficient liquidity to stabilize the company’s operations and satisfy key vendor, employee, and other key stakeholder commitments for the duration of the restructuring process.

The DIP financing is expected to be converted to equity when Magnum Hunter exits the Chapter 11 process.

Magnum Hunter

Gary C. Evans, Chairman and Chief Executive Officer of Magnum Hunter

“At a very challenging time for the entire energy industry, when many of our competitors have been forced to either file for bankruptcy without a plan to emerge in place or continue to attempt to restructure with creditors without an ‘end game,’ our global restructuring accomplishment is definitely an outlier,” said Evans.

“We also anticipate emerging from bankruptcy financially stronger than ever before.”

Like many other exploration and production companies, Magnum Hunter’s operations have been significantly impacted by the recent and continued dramatic decline in both oil and natural gas prices, as well as natural gas liquids prices, and general uncertainty in the overall energy markets.

These macro-economic factors, coupled with Magnum Hunter’s substantial debt obligations, resulted in the company’s decision to explore strategic restructuring alternatives to reduce its overall debt and achieve a sustainable reconstituted capital structure.

Posted in: Energy Financial

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