Emerge Energy Services inks restructuring agreement, files bankruptcy

By Caroline Salls

Pittsburgh, July 24 – Emerge Energy Services LP filed Chapter 11 bankruptcy on July 15 in the U.S. Bankruptcy Court for the District of Delaware.

Emerge announced in an April 22 news release that it had entered into a restructuring support agreement with operating subsidiary Superior Silica Sands LLC and the partnership’s other subsidiaries, general partner Emerge GP, some of Emerge GP’s equityholders, the lenders under Emerge Energy’s revolving credit facility and the noteholders under Emerge Energy’s second-lien note purchase agreement.

The company said the proposed financial restructuring would be implemented through an out-of-court restructuring or, if a special restructuring committee of the board of directors of Emerge GP determined that the out-of-court restructuring is no longer reasonably possible or in the best interests of Emerge Energy and its stakeholders, through a Chapter 11 bankruptcy case.

Restructuring terms

Under the restructuring, Emerge Energy’s revolving credit agreement obligations will be paid in full.

Noteholders under the note purchase agreement will receive new second-lien secured notes and ownership interests in new common units representing a 100% limited partner interest in the partnership. If holders of general unsecured claims vote to accept the company’s Chapter 11 plan, the noteholders have agreed to carve out from their collateral and receipt of interests a settlement fund to be shared collectively by those creditors and holders of existing equity in the partnership.

The settlement fund will consist of 5% of the new common units in the partnership, subject to dilution, and out-of-the-money warrants for 15% of the new common units in the partnership.

If the general unsecured claims class votes to reject the Chapter 11 plan, then those claimants and the existing equityholders will receive no distribution.

DIP financing

In conjunction with the bankruptcy filing, the company received a commitment for $35 million in debtor-in-possession financing from its secured lenders and received interim court approval for use of its cash on hand as well as the initial funding of $7.5 million of the DIP loan commitment.

HPS Investment Partners, LLC is the DIP financing agent.

Interest will accrue at the alternate Base rate plus 700 basis points or Libor plus 800 bps.

The facility will mature six months from closing.

The company said it will continue to operate in the normal course of business without interruption through the course of the Chapter 11 proceedings.

Debt details

According to court documents, Emerge Energy had $329.39 million in total assets and $266.08 million in total debt as of Sept. 30, 2018.

The company’s largest unsecured creditors are Trinity Industries Leasing Co. of Dallas, with an $8.92 million trade debt claim; Market & Johnson, Inc. of Eau Claire, Wis., with a $6.21 million trade debt claim; CIT Group/Equipment Financing Inc. of Chicago, with a $4.05 million trade debt claim; Stout Excavating Group, LLC of Bloomer, Wis., with a $3.1 million trade debt claim; TMT Solutions Inc. of San Marcos, Tex., with a $2.22 million trade debt claim; SMBC Rail Services LLC of St. Peters, Mo., with a $2.12 million trade debt claim; Di-Corp Sand Transloading LP of Edmonton, Alta., with a $2.01 million trade debt claim; Pownall Services LLC of Sugar Land, Tex., with a $1.82 million trade debt claim; Wells Fargo Rail Corp. of Rosemont, Ill., with a $1.65 million trade debt claim; and Ribscott Co., Inc. of Eau Claire, Wis., with a $1.59 million trade debt claim.

Latham & Watkins LLP is acting as legal counsel, and Houlihan Lokey is acting as investment banking debt restructuring adviser. Roy Messing of Ankura Consulting Group, LLC is the company’s chief restructuring officer, and Bryan Gaston of Ankura Consulting Group, LLC is the restructuring officer.

Southlake, Tex.-based Emerge Energy Services is a limited partnership formed in 2012 by management and affiliates of Insight Equity Management Co. LLC to own, operate, acquire and develop a portfolio of energy service assets. The Chapter 11 case number is 19-11563.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.