Ultra Petroleum inks plan support and rights offering backstop deals

By Caroline Salls

Pittsburgh, Nov. 22 – Ultra Petroleum Corp. entered into a plan support agreement and backstop commitment agreement with holders of a substantial majority of the principal amount of its outstanding 5¾% senior notes due 2018 and 6 1/8% senior notes due 2024 and shareholders who own at least a majority of the company’s common stock or economic interests, according to a news release.

The agreement sets the terms of a joint plan of reorganization with a total plan value of $6.25 billion, $6 billion or $5.5 billion, depending on commodity prices, for the Ultra entities.

The total enterprise value of the Ultra entities will be $6 billion, provided that if the average closing price of the 12-month forward Henry Hub natural gas strip price during the seven trading days preceding the launch of a rights offering solicitation is greater than $3.65/MMBtu, the plan value will be $6.25 billion. If that price is less than $3.25/MMBtu, the plan value will be $5.5 billion.

Rights offering

Under the backstop agreement, the commitment parties will fund a $580 million offering of rights to purchase shares of common stock in the reorganized company. The company said $580 million in cash will be raised at an implied 20% discount.

Noteholder rights offering shares will reflect a total purchase price of $435 million, and equityholder shares will reflect a total purchase price of $145 million.

The Ultra entities will pay the commitment parties a premium equal to 6% of the $580 million committed amount, either in the form of new common stock at the rights offering price if the plan takes effect or in cash in the amount of 4% of the $580 million committed amount if the backstop agreement is terminated.

Plan terms

Ultra said the plan provides for a comprehensive restructuring of all allowable claims against and interests, including the conversion of outstanding unsecured senior notes issued to newly issued shares of common stock, the exchange of outstanding unsecured senior notes issued by Ultra Resources, Inc. for new unsecured notes issued by Ultra Resources and cash, and the payment in full of all other allowed claims against the Ultra entities in cash.

According to an 8-K filed with the Securities and Exchange Commission, the specific plan terms will include the following:

• Holders of common stock will receive a share of 41% of the equity in the company after the reorganization is completed and a share of rights to participate in the rights offering for 5.4% of the equity, all subject to dilution by a management incentive plan;

• Holders of the 2018 notes and 2024 notes will receive a share of 36.2% of the equity and rights to participate in the rights offering for 16.1% of the equity, all subject to dilution by the management incentive plan;

• The commitment parties will receive a share of 1.3% of the equity;

• Holders of unsecured senior notes issued by Ultra Resources, Inc. and/or the Ultra Resources, Inc. credit agreement claims will receive a share of $2 billion in principal amount of new unsecured notes to be issued by Ultra Resources, Inc. and cash;

• An additional $200 million of the new Ultra Resources notes will be held in reserve for or issued to make-whole claimants following resolution of those claims; and

• Holders of other claims in the Ultra proceedings will be paid in full in cash after resolution of any objections.

“Even before we began our in-court reorganization, we have been steadfastly dedicated to preserving significant value for our shareholders, and entering into these agreements represents the next step in pursuit of that objective,” chairman, president and chief executive officer Michael Watford said in the release.

Incentive plan

Under the management incentive plan, 7.5% of the fully diluted, fully distributed shares of common stock will be reserved for issuance from time to time to management.

In addition, the company’s board of directors will select two new board members from a list of directors proposed by individual members of noteholder and equityholder committees.

These two additional directors will serve a two-year term beginning on the plan effective date, and their vote will be required for the Ultra entities to approve any merger and/or acquisition transaction during that term.

Ultra Petroleum is a Houston-based independent exploration and production company. The company filed bankruptcy on April 29, 2016 in the U.S. Bankruptcy Court for the Southern District of Texas under Chapter 11 case number 16-32202.

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