Unit announces pre-negotiated Chapter 11 plan and DIP financing terms

By Caroline Salls

Pittsburgh, May 26 – Unit Corp. filed the details of its pre-negotiated plan of reorganization and debtor-in-possession financing in an 8-K filed Tuesday with the Securities and Exchange Commission.

As previously reported, Unit filed Chapter 11 bankruptcy late Friday in the U.S. Bankruptcy Court for the Southern District of Texas to implement a plan that will reduce its funded debt obligations by more than $650 million and “right-size the company’s balance sheet for go-forward operations,” according to a Friday news release.

The Chapter 11 petitions were filed in accordance with a restructuring support agreement (RSA) between the company, the holders of more than 70% of the company’s 6 5/8% senior subordinated notes due 2021 and all of the lenders under the company’s senior credit agreement.

DIP financing

The agreement includes an equitization of all the outstanding subordinated notes and the replacement of the existing credit agreement. It also includes debtor-in-possession financing with an $180 million exit financing facility.

The bank loan lenders that are parties to the agreement have provided a commitment of up to $36 million of DIP financing.

The company anticipates up to $18 million will be available on an interim basis.

The financing, combined with the company’s usual operating cash flow, is expected to provide sufficient liquidity for the company to continue to operate in the ordinary course through the restructuring process.

BOKF, NA, doing business as Bank of Oklahoma, is the DIP financing agent.

The DIP facility will mature four months after the bankruptcy filing date with a two-month extension option.

Interest on new DIP loans and May 2020 pre-petition loans will accrue at Libor plus 650 basis points with a 1% Libor floor.

Creditor treatment

Under the plan, RBL credit facility and DIP facility lenders will receive a share of revolving loans, term loans and letter-of-credit participations under the exit facility in exchange for their allowed claims.

Holders of subordinated notes and general unsecured claims will receive a share of new common shares in the reorganized company.

Retained or former employees with a vested severance benefits claim may opt in to a settlement to receive a cash payment in lieu of new common shares otherwise provided to general unsecured creditors.

Holders of unsecured claims against the UDC, 8200 Unit, Unit Drilling Columbia and Unit Drilling USA debtors will be paid in full in the ordinary course of business.

Holders of existing common stock that do not opt out of plan releases will receive a share of a seven-year warrants to purchase a total of 12.5% of the new common shares at a total exercise price equal to the $650 million principal amount of the subordinated notes plus interest to the May 15, 2021 maturity date of the subordinated notes.

Continuation, standstill

Unit said it entered into a continuation agreement with the restructuring support agreement parties, as well as Superior, SPC and SP Investor Holdings, LLC under which the parties agreed to continue to perform, and not to enforce any rights arising as a result of the filing of the Chapter 11 cases, under the various governance, operational and related agreements entered in connection with the formation of Superior, which is Unit’s midstream joint venture with SP Investor.

The company said it also entered into a fifth amendment to a standstill and amendment agreement under which the parties agreed to the terms of an $8 million RBL credit agreement borrowing. Immediately following that borrowing, the remaining commitments of the RBL lenders under the credit facility were terminated.

Transfer procedures

In addition, Unit said it filed a motion seeking approval of procedures and restrictions for the purchase, disposition or other transfer of its common stock and claims against the company to preserve the potential value of net operating losses and other tax attributes.

If approved, the procedures would require notices of the holdings of, and proposed transactions by, any person or entity that is or, as a result of the transaction, would become, a substantial holder of stock or claims.

For purposes of the procedures, a substantial holder is any person, entity or group with beneficial ownership of at least 2,458,135 shares of common stock or an amount of claims that would result in the holder owning 4.5% of new common shares in the reorganized company.

Any prohibited transfer would be null and void.

According to court documents, Unit has $2,090,052,000 in total assets and $1,034,417,000 of total debt.

Unit is a Tulsa, Okla.-based energy company engaged through its subsidiaries in oil and natural gas exploration, production, contract drilling and natural gas gathering and processing. The Chapter 11 case number is 20-32740.

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