Atlas Resource agrees debt-to-equity restructuring, plans Chapter 11

New York, July 25 – Atlas Resource Partners, LP said it has agreed a restructuring plan with holders of its debt which it intends to implement through a Chapter 11 filing.

Under the proposal, the company’s $668 million of senior notes will be converted into 90% of the common equity and proceeds from the sale of Atlas’ hedge positions in natural gas and oil will be used to reduce revolving credit facility borrowings.

In addition, cash interest on the second-lien term loan will be reduced to 2% as soon as the restructuring proceedings begin. Holders of this loan will receive 10% of the company’s equity.

Atlas Resource Partners has signed a restructuring support agreement with all of the lenders under its revolving credit facility and second-lien term loan and with holders of 80% of its senior notes, according to a news release.

Atlas Energy Group, LLC, general partner of Atlas Resource Partners, will receive a 2% economic interest in the restructured company as consideration for providing administrative management, operating and other services following the restructuring. The 2% economic interest will be represented by a preferred share of the new holding company.

Atlas Resource Partners’ debt will receive the following treatment:

• The revolving credit facility will be replaced by a new senior secured revolving credit facility with a $440 million borrowing base made up of a $410 million conforming tranche and a $30 million non-conforming tranche.

Redetermination of the borrowing base will be suspended until May 1, 2017.

The revolver’s maturity will be pushed out to Aug. 23, 2019 except for the non-conforming tranche, which will terminate on May 1, 2017;

• The $250 million second-lien term loan plus the accrual of PIK interest during the restructuring on the $250 million will be replaced with $250 million of secured term loans that will initially pay interest at 2% in cash and Libor plus 900 basis points in kind. Starting May 1, 2017, interest will payable in cash and in kind according to a pricing grid for 15 months. After the 15 months, interest will be payable in cash at Libor plus 900 bps.

The lenders will receive 10% of the company’s equity; and

• The company’s 7¾% senior notes due 2021 and 9¼% senior notes due 2021 will be exchanged for 90% of the company’s equity.

Holders of Atlas’ common and preferred units will receive nothing.

The partnership plans to emerge from the restructuring with the new name of Titan Energy, LLC and intends to be classified as a corporation for federal income tax purposes.

Atlas aims to cut its debt by $900 million through the restructuring.

Atlas said it planned to start soliciting votes for the restructuring plan from lenders under the revolver and the second-lien loan and holders of the notes on Monday.

It expects to file for Chapter 11 on July 27.

Perella Weinberg Partners LP is financial adviser and Skadden, Arps, Slate, Meagher & Flom, LLP and Paul Hastings LLP are legal counsel to the partnership. Opportune LLP is financial adviser and Linklaters LLP is legal counsel to the revolving credit facility agent. PJT Partners is financial adviser and Latham & Watkins LLP is legal counsel to the second-lien lenders. Centerview Partners LLC is financial adviser and Akin Gump Strauss Hauer & Feld LLP is legal counsel to an ad hoc group of senior noteholders.

Atlas Resource Partners previously missed the $13.7 million interest payment due July 15 on its 7¾% senior notes due 2021.

Atlas Resource Partners is an oil and gas master limited partnership based in Fort Worth, Texas.

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