Chaparral Energy Inc. filed for chapter 11 protection, its second trip into bankruptcy in less than four years, joining a slew of oil-and-gas drillers undone by low commodity prices and the economic downturn sparked by efforts to contain the coronavirus pandemic.
The Oklahoma City company filed for chapter 11 Sunday in U.S. Bankruptcy Court in Wilmington, Del., after reaching a restructuring support agreement on a $300 million debt-for-equity swap with bondholders.
More than two-thirds of its lenders and bondholders have signed off on the prepackaged reorganization plan, which calls for lenders to provide $175 million in a reserves-based exit facility and a fully backstopped $35 million new-money convertible-note rights offering. The company’s existing reserves-based lenders will be paid in full, about $190 million, in cash and new debt. Chaparral’s bondholders will see an estimated recovery of 15% to 47% under the debt-for-equity swap, according to an outline of the plan filed with the court.
Chaparral said the plan would also bolster its liquidity position.
Like other drillers based in the oil patch, Chaparral has been bludgeoned by the twin blows of volatile oil-and-gas pricing caused by the price war between Russia and Saudi Arabia earlier this year along with a sudden drop in energy demand brought on by the coronavirus pandemic. Among the fallen are shale-drilling pioneer Chesapeake Energy Corp., which filed for bankruptcy in June, and Denbury Resources Inc., which filed for bankruptcy the following month. Houston-based offshore driller Fieldwood Energy LLC filed for the second time in as many years earlier this month and Austin, Texas-based Remora Petroleum LP filed for bankruptcy last week.
“While we have taken carefully measured and decisive action to address the challenges of 2020, the overall impact to the energy industry, including Chaparral, has been severe,” Chief Executive Chuck Duginski said Monday.
The Oklahoma City company drew down on its revolving credit line in April as it sought to shore up its cash reserves to weather the collapse in oil prices and disruptions caused by the coronavirus.
As of Friday, Chaparral had $32 million in cash, which combined with its normal operating cash flow is enough to allow the company to continue operating pending approval of its prepackaged restructuring plan.
Prepackaged plans, in which a sufficient number of creditors have already voted to approve a deal, have become increasingly popular with companies looking to reduce the time and expense spent in the chapter 11 process.
Trading in shares of Chaparral, which closed Friday at 39.2 cents, was halted premarket Monday. The company said its existing shares have no value and will be canceled without any distribution upon the company’s exit from bankruptcy.
Chaparral also filed for bankruptcy in 2016 after oil prices crashed, one in a wave of oil-and-gas companies to do so. The company emerged from bankruptcy the following year, handing ownership to its bondholders.
The company’s bankruptcy advisers include law firm Davis, Polk & Wardwell LLP; investment banks Rothschild & Co. and Intrepid Partners LLC; and financial adviser Opportune LLP. Law firm Sidley Austin LLP is advising Chaparral’s board.
The case number is 20-11947.
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View more information: https://www.marketwatch.com/story/chaparral-energy-files-for-bankruptcy-again-2020-08-17