Chisholm Oil Chapter 11 plan of reorganization confirmed by court

By Sarah Lizee

Olympia, Wash., Sept. 23 – Chisholm Oil and Gas Operating, LLC obtained court approval of its joint Chapter 11 plan of reorganization, according to an order filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the company filed its Chapter 11 cases to implement a partial equitization of its funded debt obligations and a distribution of take-back debt, coupled with the availability of new working capital through the funding of an exit financing facility.

Chisholm entered a restructuring support agreement with its RBL agreement lenders holding 99.6% of claims arising under that agreement and consenting sponsors Chisholm Oil and Gas, LLC and Gastar Holdco LLC, which indirectly hold 100% of the outstanding equity interests in the company.

The plan restructures the company’s balance sheet and provides general unsecured creditors and existing equity holders an opportunity to receive a distribution in exchange for their consent to the restructuring.

Specifically, the balance sheet will be adjusted by replacing a portion of RBL agreement claims with new debt in the form of a first-lien, second-out exit facility, equitizing the remaining RBL claims, equitizing or cancelling term loan agreement claims and cancelling existing equity interests.

The up to $40 million first-lien second-out take-back term loan facility has a seven-year term and bears interest at Libor plus 600 basis points.

The restructuring transaction offers a distribution in the form of equity and warrants to holders of term loan claims, general unsecured claims and Chisholm Oil and Gas Operating II, LLC equity interests if those classes vote to accept the plan.

Specifically, holders of other priority claims will be paid in full in cash, and holders of other secured claims will receive full payment in cash or have their claims reinstated.

Holders of RBL claims will receive their pro rata share of the FLSO term loan and 95% of the new equity interests, subject to dilution by the management incentive plan equity and, if class 4, class 5 and class 7 vote to accept the plan and as of the confirmation date, the consenting sponsors have not terminated their obligations under the restructuring support agreement, the warrant equity. If class 4 does not vote to accept the plan, holders will receive an additional 5% of the new equity interests, subject to dilution by the management incentive plan equity. If class 4 votes to accept the plan but either class 5 or class 7 does not vote to accept the plan, or prior to the confirmation date, the consenting sponsors terminate their obligations under the restructuring support agreement, they will receive an additional 1% of the new equity interests, subject to dilution by the management incentive plan equity.

Holders of term loan claims who vote to accept the plan will receive their pro rata share of 4% of the new equity interests, subject to dilution by the warrant equity and the management incentive plan equity.

Holders of general unsecured claims will receive, if they vote to accept the plan, their pro rata share of the $3 million GUC cash pool, which is subject to reduction.

All intercompany claims will be paid, adjusted, continued, settled, reinstated, discharged or eliminated, in each case to the extent determined to be appropriate by the debtors with the consent of the RBL agent.

Chisholm parent equity interests will be cancelled. If classes 4, 5 and 7 vote to accept the plan, holders may receive their pro rata share of 1% of the new equity interests, subject to dilution by the warrant equity and the management incentive plan equity, and warrants for up to 11% of the new equity interests, subject to dilution by the management incentive plan equity.

Chisholm management equity interests will be cancelled.

Intercompany interests will be adjusted, continued, settled, reinstated, discharged or eliminated as determined by the debtors with the consent of the RBL agent.

The reorganized debtors will fund cash plan distributions with cash available on or after the effective date and cash proceeds from a $15 million first-lien first-out new money exit reserve-based credit facility.

Chisholm is a Tulsa, Okla.-based exploration and production company. It filed bankruptcy on June 17 under Chapter 11 case number 20-11593.

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