Bonanza Creek inks restructuring deal, to file bankruptcy by Jan. 5

By Caroline Salls

Pittsburgh, Dec. 23 – Bonanza Creek Energy, Inc. said it will make a pre-packaged Chapter 11 bankruptcy filing in the U.S. Bankruptcy Court for the District of Delaware by Jan. 5 after reaching a restructuring support agreement with holders of its 6¾% senior notes due 2021 and 5¾% senior notes due 2023 and crude oil purchase and sale pipeline counterparty NGL Crude Logistics, LLC.

NGL Crude Logistics’ parent, NGL Energy Partners, LP, is also a party to the restructuring support agreement.

According to a Bonanza Creek news release, holders of 51.1% of the outstanding senior notes signed the agreement.

The company said the pre-packaged plan of reorganization will significantly deleverage its balance sheet and provide Bonanza Creek with $200 million of additional liquidity from an equity rights offering backstopped by some of the senior noteholders.

“During 2016 we have been working diligently to reduce our cost structure and improve operating efficiencies under our commitment to rapid continuous improvement initiatives,” Bonanza Creek chief executive officer Richard Carty said in the release.

“The restructuring support agreement announced today further increases our competitive position with significant improvements in firm transportation commitments, a comprehensive elimination of more than $850 million in unsecured balance sheet principal, accrued interest and prepayment premiums and a concurrent injection of $200 million in equity to fund our go-forward development plan.

“We look forward to completing the restructuring quickly with minimal disruption to our business and to repositioning our company as a galvanized operator with an expectation to emerge with no debt and a strengthened liquidity position to execute upon our extensive asset development opportunities.”

Restructuring terms

Bonanza Creek said the proposed restructuring would eliminate more than $850 million of principal, accrued interest and prepayment premiums on the senior notes.

In exchange, 95.5% of reorganized Bonanza Creek’s equity, subject to dilution by a rights offering, a management incentive plan, and warrants for existing equityholders, and the opportunity to participate in an equity rights offering that will raise $200 million of new capital will be made available to holders of general unsecured claims.

Specifically, holders of general unsecured claims against Bonanza will receive 29.4% of the new common shares and 37.8% of subscription rights.

Holders of general unsecured claims against debtors other than Bonanza and Bonanza Creek Energy Operating Co., LLC will receive 48.5% of the new common shares and 62.2% of the subscription rights, and holders of general unsecured claims against Bonanza Creek Operating, will receive 17.6% of the new common shares.

The company said this new capital commitment will be backstopped under an agreement to be entered into by some supporting noteholders.

In addition, Bonanza Creek’s crude oil purchase and sale agreement with NGL will be restructured on more favorable terms to the company.

All customer, employee, royalty and working interest obligations will be paid in full in the ordinary course.

The company’s existing shareholders will receive, subject to dilution, 4.5% of reorganized Bonanza Creek’s equity and three-year warrants to acquire up to 7.5% of equity in exchange for the specified releases.

The warrants will be issued at a per-share price based on a total equity value of $1.45 billion of the reorganized company.

The company said it is in discussions with revolving credit facility administrative agent KeyBank, NA regarding the treatment of the revolver and the terms of a renegotiated revolving credit facility after emergence from Chapter 11.

Bankruptcy timeline

Bonanza Creek said it planned to begin solicitation of plan votes on Dec. 23. The voting deadline is Jan. 23, and the record date for voting is Dec. 20.

The company said it expects to emerge from Chapter 11 before the end of the first quarter of 2017.

Davis, Polk & Wardwell LLP is acting as legal counsel, Perella Weinberg Partners LP is acting as financial adviser, and Alvarez & Marsal LLC is acting as restructuring adviser to the company in connection with its restructuring efforts. Kirkland & Ellis LLP is acting as legal counsel and Evercore Group LLC is acting as financial adviser to an informal committee of noteholders.

The oil and natural gas company is based in Denver.

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