Swift Energy finalizes plan to forgive $905 million in debt following Chapter 11
Swift Energy announced today that the company is emerging from bankruptcy following the completion of its financial restructuring. Under the terms of the company’s plan to reorganize, roughly $906 million of the company’s senior debt and “certain other unsecured claims” were exchanged for 88.5% of the post-emergence company’s stock. Swift also said that the lenders of the company’s Debtor-in-Possession (DIP) Credit Agreement will receive a backstop fee consisting of 7.5% of the company’s newly issued stock, and that the lenders have agreed to convert the entirety of the $75 million loan to equity that will be paid in the company’s new stock, which “will only come from the 88.5% of new common stock to be distributed to the current holders of the senior notes and certain unsecured creditors.”
All outstanding common stock in the company will be cancelled and current shareholders will be entitled to receive 4% of the newly issued stock and certain warrants. Those warrants will entitle existing shareholders to an additional 30% of newly issued stock.
Swift also announced that the company’s bank group agreed to provide a $320 million reserve-based exit loan that will refinance the existing loan and be used “among other things, to fund obligations under the plan and the company’s operations following its emergence from bankruptcy.”
In conjunction with its emergence from Chapter 11, Swift also closed on a sale of assets in Central Louisiana to TEXEGY LLC. The sale was for a 75% share in Swift’s holdings in the South Bearhead Creek Field and Burr Ferry Field areas, according to a company press release. Swift reported $4.1 million in oil and gas sales from its Central Louisiana assets in its third quarter 2015 release.
Swift Energy and TEXEGY entered into a joint development agreement and a joint operating agreement to continue operations and development of the Louisiana assets. SV Energy Company, an affiliate of TEXEGY, now serves as the operator of the properties, conducting all drilling, completion and production operations.
Swift Energy said the proceeds from the sale were used primarily to reduce the amount of borrowings under the company’s credit facility prior to the Chapter 11 reorganization effective date and for other general corporate purposes.
A relatively quick exit thanks to noteholders
Swift energy exited the Chapter 11 process relatively quickly, announcing the end of proceedings 115 days after it filed.
“Our noteholders’ continued support and willingness to invest in our company were critical to our emergence as was the agreement by our reserve-based lenders to provide the financing we needed to exit Chapter 11 and operate our business into the future,” Terry Swift, the company’s CEO, said in its press release.
In some bankruptcy proceedings, there is a tension that exists between holders of secured and unsecured debt, Haynes and Boone Partner Patrick Hughes told Oil & Gas 360®. It takes agreement from most parties involved in a bankrupt company’s debt in order to move it through proceedings in a timely manner. A disagreement with the unsecured debt holders over the value of their stake in the company’s debt can hold up the process.
In the case of quick Chapter 11 filings like Southcross Holdings, which exited Chapter 11 in just two weeks, the unsecured creditors were left unimpaired, meaning they agreed with secured debt holders on the value of their holdings. It appears similar agreement existed among Swift’s noteholders, making the process move more smoothly.
