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Bonanza Creek Energy Initiates Prepackaged Chapter 11 Proceedings

January 06, 2017, 07:25 AM
Filed Under: Bankruptcy

Bonanza Creek Energy, Inc. and certain subsidiaries today announced that they had filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the District of Delaware to pursue a prepackaged plan of reorganization, in accordance with the previously announced restructuring support agreement with certain of their noteholders and one of their crude oil purchase and sale counterparties, NGL Crude Logistics, LLC and its parent, NGL Energy Partners LP, to effectuate a comprehensive restructuring.

The RSA and Prepackaged Plan provide for a substantial deleveraging transaction pursuant to which Bonanza Creek will transform its balance sheet by equitizing approximately $867 million of its existing unsecured bond obligations and substantially bolster its liquidity position through a $200 million rights offering for new equity, to be backstopped by certain unsecured noteholders.  The RSA and Prepackaged Plan also provides that the Company’s existing shareholders, in exchange for the releases by such shareholders of the Released Parties (as defined in the Plan), will receive 4.5% of reorganized Bonanza Creek’s equity as of the effective date of the Prepackaged Plan (subject to dilution by a rights offering for new equity, a management incentive plan, and warrants for existing equity holders) and 3-year warrants to acquire up to 7.5% of equity in reorganized Bonanza Creek.

Certain holders (the “Supporting Noteholders”) of its 6.75% senior notes due 2021 (the “2021 Notes”) and 5.75% senior notes due 2023 (the “2023 Notes” and together with the 2021 Notes, the “Senior Notes”) collectively holding 51.1% of its outstanding Senior Notes, and one of its crude oil purchase and sale counterparties, NGL Crude Logistics, LLC and its parent, NGL Energy Partners, LP (collectively, “NGL”) have agreed to vote in favor of the Prepackaged Plan.

The Company began the solicitation of votes on the Prepackaged Plan prior to filing its petition.   Subject to Bankruptcy Court approval of the Prepackaged Plan and the satisfaction of certain conditions to the Plan and related transactions, the Company expects to consummate the Prepackaged Plan and emerge from Chapter 11 before the end of the first quarter of 2017.  There can be no assurances that the Prepackaged Plan will be confirmed pursuant to the Bankruptcy Code.

The Company will continue to operate its business as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and fully expects to continue existing operations and maintain staffing and equipment as normal throughout the court-supervised financial restructuring process.  The Company has filed a series of motions with the Bankruptcy Court requesting authority to continue normal operations, including requesting Bankruptcy Court authority to continue paying trade creditors, royalty interest holders, and employee wages and salaries in the ordinary course and providing employee benefits without interruption.   The Company will continue to work closely with its suppliers and partners to ensure that it meets ongoing obligations, and business continues uninterrupted.

Richard Carty, Bonanza Creek’s Chief Executive Officer, commented, “We look forward to completing the restructuring quickly with minimal disruption to our business, and anticipate meeting ongoing obligations to our employees, customers, vendors, suppliers and others throughout the Chapter 11 process.”

“The filing of our prepackaged bankruptcy cases with the Bankruptcy Court is a significant milestone in the process to achieve financial stability and reposition Bonanza Creek with a strengthened liquidity position to execute on our extensive asset development opportunities,” Mr. Carty added.

As noted above, the RSA anticipates that the restructuring would be implemented through the Prepackaged Plan, which remains subject to Bankruptcy Court approval and the satisfaction of conditions laid out in the Prepackaged Plan.

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