Approach Resources moves to protect tax attributes, access financing

By Caroline Salls

Pittsburgh, Nov. 19 – Approach Resources Inc. filed a number of motions with the U.S. Bankruptcy Court for the Southern District of Texas that are generally designed to stabilize the company’s operations and facilitate its transition into Chapter 11, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

Approach said these motions seek approval from the court to pay obligations related to employee wages, salaries and benefits, pay taxes and make payments to holders of royalty, working and other mineral interests as required by various leases and related agreements essential to the company’s businesses.

In addition, Approach filed a motion to establish procedures related to direct and indirect trading and transfers of its stock and seeking related relief in order to protect the potential value of its net operating loss carryforwards and other tax attributes for use in connection with the reorganization.

If approved, the procedures would restrict transactions involving, and require notices of the holdings of and proposed transactions by, any person or group of persons that is or, as a result of such a transaction, would become, a substantial stockholder.

The procedures define a substantial stockholder as a person or group of persons that beneficially own at least 4.45 million shares of common stock, representing 4.75% of all issued and outstanding shares of Approach common stock.

Any prohibited transfer of stock would be null and void and may lead to contempt, compensatory damages, punitive damages or sanctions being imposed by the court.

Approach said it also requested court approval to access $16.5 million in new-money debtor-in-possession financing.

JPMorgan Chase Bank, NA is the administrative agent.

The company said the DIP financing will provide valuable liquidity, which, along with cash on hand and cash generated from ongoing operations, will be used to support Approach’s business and any marketing and sale process.

The $41.25 million financing package also includes a $24.75 million refinancing roll-up term loan.

The DIP facility will mature on the earliest of seven months after Approach’s bankruptcy filing date, approval of a sale, the effective date of a Chapter 11 plan, the conversion or dismissal of the Chapter 11 cases and upon occurrence of an event of default.

Interest will accrue at the alternate Base rate plus 500 basis points or Libor plan 600 bps with a 2% Libor floor.

The company listed $1 billion to $10 billion in assets and $500 million to $1 billion in debt on its Chapter 11 petition.

Approach Resources is a Fort Worth-based oil and gas company. The company filed bankruptcy on Nov. 18 under Chapter 11 case number 19-36444.

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