Lonestar Resources US inks restructuring deal, will file bankruptcy

By Caroline Salls

Pittsburgh, Sept. 15 – Lonestar Resources US Inc. and some of its subsidiaries have entered into a restructuring support agreement with its largest stakeholders that will eliminate $390 million in debt obligations and preferred equity interests, according to a company news release.

Under the terms of the support agreement, roughly $250 million of the company’s 11¼% senior notes due 2023 will be converted to equity and accrued interest on those notes will be extinguished.

In addition, lenders under the company’s revolving credit facility who agree to accept a pre-packaged plan of reorganization will receive their share of warrants to purchase up to 10% of the new equity interests in the company, subject to dilution only by the issuance of new equity interests under a management incentive plan, and will receive revolving loans under the exit revolving credit facility and term loans under the second-out exit term facility.

Holders of preferred equity interests will receive their share of 3% of the new equity interests, subject to dilution by the incentive plan and new warrants, and holders of existing class A common stock will receive their share of 1% of the new equity interests, subject to dilution by the incentive plan and warrants.

The proposed transactions will be completed through a Chapter 11 plan of reorganization.

Lonestar said it has already obtained support for the proposed transactions from lenders holding 100% of the principal amount outstanding under its revolving credit facility, noteholders holding 67.1% of the principal amount outstanding under its notes and holders of 100% of its preferred equity interests.

According to an 8-K filed with the Securities and Exchange Commission, preferred stockholder Chambers Energy Capital III, LP has separately agreed to support the transaction, not take any action that is inconsistent with the transaction and vote all claims and/or interests to accept the plan.

The company said it is confident, based on the support agreement, that it will be able to meet its financial commitments and otherwise continue to operate its business as usual throughout the restructuring period.

Lonestar said it expects to fund the cases and continue to operate its business with cash on hand and proceeds from the consensual termination of existing hedging arrangements with revolver lenders.

Unsecured trade creditors will be paid in full under the plan.

Milestones set in the support agreement require the company to make the pre-packaged Chapter 11 filing by Sept. 30, obtain confirmation of the plan no more than 60 days after the filing and have the plan take effect on the earlier of 14 days after confirmation and 11:59 p.m. ET on Dec. 1.

“We have carefully considered our options in the unprecedented environment faced by the energy industry and concluded that a consensual restructuring is in the best interest of the company,” chief executive officer Frank D. Bracken III said in the release.

“In combination with our efforts to meaningfully reduce our capital and operating costs, the significant reduction in leverage that this transaction will afford the company will position Lonestar to be highly competitive going forward.”

The company is represented in this matter by Latham & Watkins LLP, Hunton Andrews Kurth LLP, Intrepid Partners LLC, Rothschild & Co US Inc. and AlixPartners, LLP.

Lonestar is a Fort Worth-based oil and natural gas company.

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