Ferrellgas Chapter 11 plan accepted by both voting creditor classes

By Sarah Lizee

Olympia, Wash., Feb. 5 – Ferrellgas Partners, LP and Ferrellgas Partners Finance Corp.’s Chapter 11 plan of reorganization was accepted by both voting creditor classes, according to a notice filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

Specifically, 395 holders, or 93.82% in number, of $309.7 million, or 99.84% in amount, of 2020 notes claims voted to accept the plan, while 26 holders, or 6.18% in number, of $497,000, or 0.16% in amount, voted to reject the plan.

Meanwhile, 3,176 holders, or 84.99% in number, of 41.95 million, or 95.89% in amount, of existing LP unit interests voted to accept the plan, while 561 holders, or 15.01% in number, of 1.8 million, or 4.11% in amount, voted to reject the plan.

A combined hearing on final approval of the disclosure statement and confirmation of the plan is scheduled for Feb. 19.

As previously reported, the debtors filed Chapter 11 bankruptcy in order to implement a restructuring with support from a substantial majority of noteholders.

The transaction support agreement will permit Ferrellgas to remain an independent, employee-owned business under current management while restructuring substantially all of its debt, as previously reported.

Ferrellgas said it will continue to satisfy all its obligations to employees, vendors, suppliers and other partners without interruption.

While operations continue as normal, under the transaction support agreement, the debt of Ferrellgas Partners and Ferrellgas Partners Finance will be eliminated, roughly $1.5 billion of debt of Ferrellgas, LP will be refinanced and over $1 billion of new capital will be raised by Ferrellgas, LP.

Holders of 74% of the outstanding amount of 8 5/8% senior notes due 2020 have consented to the transaction support agreement.

The consenting noteholders have agreed to forbear from taking actions with respect to any default under the notes that arose from failure to make payments of the principal due, and to vote in favor of any matter requiring approval to the extent necessary to implement the transactions and the plan.

Under the plan, each holder of an allowed claim based on the 2020 notes will receive their pro rata share of 100% of the new class B units issued by Ferrellgas Partners.

Each holder of existing common units of Ferrellgas Partners will receive or retain their pro rata share of the new class A common units issued by Ferrellgas Partners, subject to dilution by the new class A units issued upon conversion of the new class B units.

Any allowed secured guarantee claim on account of the guarantee of payment by Ferrellgas Partners of the 10% senior secured first-lien notes due 2025 will not be impaired and will be reinstated.

Any allowed claim on account of the pending litigation in the U.S. District Court for the Eastern District of Pennsylvania under the caption Eddystone Rail Co., LLC v. Bridger Logistics, LLC will not be impaired and will be reinstated.

Ferrellgas Partners will issue new class A units to all current holders of the existing Ferrellgas Partners units and may, with the consent of the required noteholders, issue additional new class A units.

Ferrellgas Partners will issue 100% of the new class B units to the holders of the 2020 notes.

Distributions to new class A units and new class B units will be made at a ratio of no less than 6 to 1 in favor of the new class B units on an aggregate basis until holders of new class B units receive distributions in the aggregate amount equaling $357 million. Then, the new class B units will automatically be converted to new class A units at an applicable conversion rate that steps up each year post-emergence and starts at 1.75x and ends at 25x in year 10.

The new class B units will be callable at Ferrellgas Partners’ option in the first five years after issuance at a price no less than an internal rate of return on $357 million, subject to receipt of a minimum amount if called in the first year after issuance.

The holders of new class B units will, at the time of issuance, receive the right to acquire all general partner units of the general partner of Ferrellgas Partners and Ferrellgas, LP if the new class B units are still outstanding and have not been converted to new class A units by the earlier of a material breach of covenants in favor of the new class B units that is not cured within a certain time period, and 10 years after the effective date.

Ferrellgas, LP will issue $753 million of new or additional notes, and will also enter into a revolving credit facility with terms and conditions acceptable to the required consenting noteholders.

Either Ferrellgas, LP or Ferrellgas Partners will issue $525 million of new unregistered preferred equity.

Ferrellgas Partners’ existing unsecured notes due 2021, 2022 and 2023 will be redeemed.

Ferrellgas Partners or Ferrellgas, LP will provide the holders of 2020 notes with the opportunity to participate in the marketing process for the new senior preferred units and to acquire up to 35% of the total amount of the new senior preferred units issued.

The transaction support agreement contains milestones relating to the Chapter 11 process, including emerging by no later than April 4.

Ferrellgas is an Overland Park, Kan.-based distributor of propane and related equipment. The company filed bankruptcy on Jan. 11 under Chapter 11 case number 21-10021.

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