From the Wall Street Journal
Lawyers who put oil and gas producer Warren Resources Inc. into bankruptcy proceedings laid out plans at a Friday court hearing for the company to get a fresh financial start.
The Houston-based company said its executives have negotiated a $20 million bankruptcy loan so it can continue pulling natural gas from underground deposits in Pennsylvania and crude oil from the Los Angeles basin for Phillips 66 Co.’s refinery in Carson, Calif. Warren also drills for gas in Wyoming.
The company faces $545.2 million in debt, according to documents filed in U.S. Bankruptcy Court in Houston.
Warren Resources, however, won’t need to spend that loan money right away because it negotiated to spend $10 million of cash in an otherwise-restricted bank account, officials told Judge Marvin Isgur at the hearing.
The consent to spend that restricted cash came from Blackstone Group’s GSO Capital Partners, which would forgive $248 million it is owed for 82.5% ownership in Warren Resources under a restructuring proposal. Warren Resources would also emerge with a fresh $130 million loan from GSO Capital.
Lawyers for the company said the bankruptcy proceedings would wrap up by mid-September under the restructuring proposal, which still needs to be approved by Judge Isgur and creditors who have the power to vote.
The untouched bankruptcy loan and quick timeline drew criticism from Claren Road Asset Management LLC, a lower-ranking lender poised to get the remaining 17.5% ownership in Warren Resources as payback on its $167.3 million debt.
At Friday’s hearing, Claren Road lawyer Kurt Mayr suggested Warren’s unexpected bankruptcy filing and potentially quick restructuring would enable GSO Capital to take over the company before natural gas prices rebound and the company’s value rises. “We can see why [GSO Capital] would like to have this case in and out of court while prices are low,” Mr. Mayr said in court papers.
