Vanguard Natural Resources files bankruptcy to fix capital structure

By Caroline Salls

Pittsburgh, April 1 – Vanguard Natural Resources, Inc. filed Chapter 11 bankruptcy Sunday in the U.S. Bankruptcy Court for the Southern District of Texas.

“The restructuring steps that we have announced today are necessary to attain a capital structure which is suitable for Vanguard’s assets and future business strategy,” president and chief executive officer R. Scott Sloan said in a news release.

“We are now focused on expediting an efficient in-court restructuring, maintaining our operational momentum and upholding our obligations to our employees and vital vendors and stakeholders.”

Vanguard emerged from a previous Chapter 11 case on Aug. 1, 2017.

The company said it has obtained a committed $130 million debtor-in-possession financing facility, which calls for $65 million in new money, up to $20 million of which will become immediately available upon court approval, and $65 million of which will roll up obligations related to revolving loans under the company’s existing credit agreement.

Subject to court approval, this DIP financing, combined with the company’s cash from operations, is expected to provide sufficient liquidity during the Chapter 11 cases to support its continuing business operations and minimize disruption.

The DIP facility is underwritten by Citibank, NA.

The financing will mature on the earliest of nine months after the bankruptcy filing date, five days after the filing date if the interim order has not been entered, 35 days after entry of the interim order if the final order has not been entered, the effective date of a Chapter 11 plan, the closing of a sale of substantially all of the company’s equity or assets, the date of repayment in full of DIP loan obligations and the date of the termination of the commitments and/or acceleration of the loans.

Interest will accrue at Libor plus 550 basis points.

Vanguard has filed a series of motions with the court that, when granted, are expected to generally enable the company to maintain its operations as usual throughout the restructuring process. Included in these first day motions are requests to continue to pay employee wages, honor existing employee benefit programs, continue to pay taxes and pay royalties to mineral owners under the terms of applicable agreements.

The company has also filed motions seeking authority to pay expenses associated with its operations and drilling and completion activities, as well as costs associated with gathering, processing, transportation, marketing and those related to joint interest billing for non-operated properties.

As of Feb. 28, Vanguard had $1,477,699,661 in total assets and $1,196,354,335 in total debt.

The company’s largest unsecured creditors are Pinedale Energy Partners of Tulsa, Okla., with a $2.38 million trade claim and WGR Operating LP of The Woodlands, Texas, with a $2.11 million trade claim.

No other unsecured creditors were listed with claims of $1 million or more.

Marathon Asset Management, LP owns 24.4% of the company’s shares, Contrarian Capital Management, LLC owns 16.7%, Morgan Stanley & Co. LLC owns 10.9%, and Monarch Alternative Capital LP owns 10.2%.

Kirkland & Ellis LLP is serving as legal counsel, and Evercore Partners is acting as financial adviser to Vanguard. Opportune LLP is the company’s restructuring adviser.

Vanguard is a Houston-based oil and gas exploration and development company. The Chapter 11 case number is 19-31786.

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