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Forbes Energy Services Reorganization Plan Confirmed, Regions Bank Named Sole Lender

March 31, 2017, 07:13 AM
Filed Under: Bankruptcy

Forbes Energy Services Ltd.announced that the plan of reorganization under Chapter 11 of the United States Bankruptcy Code of Forbes and its domestic subsidiaries has been confirmed by the U.S. Bankruptcy Court for the Southern District of Texas-Corpus Christi Division. The Debtors, which filed for Chapter 11 on January 23, 2017, anticipate that the Plan will become effective in mid-April 2017.

Through the restructuring process and upon emergence, the Debtors will achieve a net reduction in their debt by approximately $230 million.

The Plan anticipates that, among other things, on the Effective Date:

  • All existing Equity Interests (as defined in the Plan and which include Forbes's common stock, Forbes's preferred stock, awards under Forbes's prepetition incentive compensation plan and the preferred stock purchase rights under Forbes's rights agreement) of Forbes will be extinguished without recovery;
  • Forbes 9% senior notes due 2019 will be cancelled and each holder of the Senior Notes will receive such holder's pro rata share of (a) $20 million in cash and (b) 100% of the new common stock of reorganized Forbes, subject to dilution only as a result of the shares of new common stock of reorganized Forbes issued or available for issuance in connection with a proposed management incentive plan (the "Management Incentive Plan");
  • Certain holders of the Senior Notes will make available to the reorganized Debtors a $50 million new first lien term loan facility which is being backstopped by certain holders of the Senior Notes;
  • The Debtors' existing loan and security agreement, dated as of September 9, 2011, with Regions Bank will be terminated and a new letter of credit facility entered into with Regions Bank. Regions Bank, as the sole lender under the Loan Agreement will receive cash to satisfy all outstanding obligations with respect to the Revolving Advances (as defined in the Loan Agreement), including, without limitation, all outstanding Revolving Advances and all interest, fees, and other charges due and payable under the Loan Agreement relating to the Revolving Advances.
  • As to the Issuer and Bank Product Provider (as each term is defined in the Loan Agreement), Regions will continue to hold the cash pledged by Debtors to collateralize all outstanding letters of credit and Bank Product Obligations under the Loan Agreement that will be covered by the New Regions Facility;
  • Holders of allowed creditor claims, aside from holders of the Senior Notes, will either receive, on account of such claims, payment in full in cash or otherwise have their rights reinstated under the Bankruptcy Code.

Pachulski Stang Ziehl & Jones LLP is acting as legal restructuring counsel, Winstead PC is acting as corporate and securities counsel, and Alvarez & Marsal North America, LLC and Jefferies LLC are acting as financial advisors for the Company. Fried, Frank, Harris, Shriver & Jacobson LLP is acting as legal counsel and FTI Consulting, Inc. is acting as financial advisor to those holders of the Senior Notes party to the Restructuring Support Agreement dated as of December 21, 2016 among the Debtors and such holders.

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