PostRock Energy files Chapter 11 bankruptcy to facilitate asset sale

By Caroline Salls

Pittsburgh, April 1 – PostRock Energy Corp. filed Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the Western District of Oklahoma to facilitate a sale of substantially all of its assets, according to a company news release.

In addition, PostRock subsidiary Constellation Energy Partners Management, LLC made a Chapter 7 bankruptcy filing.

PostRock said it does not expect any recovery for its stockholders and expects that its stockholders will lose their entire investment.

“Following a comprehensive review of our alternatives and in consultation with our secured lenders, the board of directors and management team determined that this process would produce the best outcome for PostRock and its creditors,” interim president and chief executive officer Clark Edwards said in the release.

In connection with the filing, PostRock is seeking court approval to use the cash collateral of secured lender Citibank NA to fund its operations while in bankruptcy.

According to court documents, PostRock has $10 million to $50 million in assets and $50 million to $100 million in debt.

The company’s largest unsecured creditors are Citibank NA of Tampa, Fla., with a $10.01 million loan debt claim; Texas Capital Bank, NA of Dallas, with a $7.08 million loan debt claim; BBVA Compass of Houston, with a $4.35 million loan debt claim; Cadence Bank NA of Houston, with a $4.35 million loan debt claim; OneWest Bank, FSB of Pasadena, Calif., with a $4.35 million loan debt claim; and the Kansas Department of Revenue, with a $1.25 million litigation and tax liability claim.

PostRock said its operations have been significantly impacted by the recent and dramatic decline in oil prices, the continued low prices of natural gas and general uncertainty in the energy market.

The company announced last month that it received written notice from the administrative agent that lenders have accelerated the balance of its debt under its third amended and restated credit agreement originally dated Dec. 20, 2012.

In February, PostRock received a written default notice from the credit agreement’s administrative agent, due to the company’s failure to make the quarterly interest payment due Feb. 11 and its failure to cure the borrowing base deficiency.

According to an 8-K filed with the Securities and Exchange Commission, the bankruptcy filing constitutes an event of default under the company’s credit agreement, but efforts to enforce default-related rights are automatically stayed by the filing.

The company also announced the resignation of current directors Duke R. Ligon, Alexander P. Lynch, William H. Damon III, J. Philip McCormick and Clark W. Edwards, effective upon the appointment of a trustee in bankruptcy.

The company is represented by Crowe & Dunlevy PC.

PostRock is an oil and natural gas company based in Oklahoma City. The Chapter 11 case number is 16-11230.

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