Delta Petroleum files bankruptcy, lists $310.68 million of total debt

By Caroline Salls

Pittsburgh, Dec. 16 - Delta Petroleum Corp. filed Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the District of Delaware.

"After reviewing all of our alternatives, the company's management and board of directors, working in consultation with outside legal and financial advisors, unanimously determined that the Chapter 11 process would provide the opportunity for the best result for our creditors, shareholders, suppliers, employees and customers," chief executive officer and president Carl E. Lakey said in the release.

As previously reported, Delta Petroleum announced in November that it would need to restructure its debt, based on the results of a review of its strategic alternatives.

The company said at that time that it was in continuing to discuss transactions with potential purchasers and expected to engage in talks with some of the holders of its outstanding senior notes.

If it could not complete a transaction that addresses its liquidity issues, Delta Petroleum said it would be required to file for Chapter 11 bankruptcy.

The company's board of directors hired Macquarie Capital (USA) Inc. and Evercore Group, LLC as advisers in July to help with the strategic alternative process in order to maximize shareholder value and address 2012 debt maturities.

Through that process, Delta's the board considered a wide variety of possible transactions, including the sale of the company, issuances of equity or debt securities, sales of assets, joint ventures and volumetric production payment financing, the November release said.

However, Delta Petroleum said it had not received any definitive purchase offer that implied an asset value greater than its total debt. The company said it also had not been able to identify any significant source of additional financing.

Financing outlook

The company said it expects its current and future cash resources to be enough to pay its court expenses and maintain its business operations in the short-term.

Additionally, Delta Petroleum said it will seek court approval of a $57.5 million debtor-in-possession facility to address longer-term liquidity needs as it works through the bankruptcy process.

According to an 8-K filed Friday with the Securities and Exchange Commission, Delta entered into a third amendment to its credit agreement with administrative agent Macquarie Bank Ltd. that increased the term loan available to the company to $22 million from $15 million.

Advances on the incremental $7 million available under the term loan are permitted to be made in two tranches of up to $5.5 million and up to $1.5 million beginning on Dec. 12 and Dec. 19, respectively.

Delta said it received the first $5.5 million incremental term loan tranche on Dec. 12, and it agreed to pay the lenders a one-time $140,000 amendment fee.

Debt details

According to court documents, Delta Petroleum had $375.5 million of assets and $310.68 million in debt as of Dec. 14.

The company's largest unsecured creditors are indenture trustee U.S. Bank of Denver, with a $152.19 million 7% unsecured high-yield notes claim and a $115.53 million 3.75% unsecured convertible notes claim, and Mesa County, Colo., treasurer, with a $4.11 million tax claim.

Tracinda Corp. owns 33% of the company's equity.

The company is represented by Morris Nichols Arsht & Tunnell LLP.

Delta Petroleum is a Denver-based oil and gas exploration and development company. The Chapter 11 case number is 11-14006.

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