Energy Creditors Lucky To Recover 15 Cents On The Dollar In Bankruptcy
Submitted by Tyler Durden on 01/23/2016 19:28 -0500
This past Wednesday, we reported that in the latest twist of the energy sector collapse, liquidating oil and gas producers, and specifically their creditors, got a nasty lesson in trough cycle asset values when in one after another bankruptcy "stalking horse" aka 363 auction, they were not only unable to cover the outstanding debt (both secured and unsecured) through asset sales, but barely able to cover a tiny fraction of it.
"A lot of people got into this business and didn’t really understand the ups and downs of price cycles,” said Becky Roof, a managing director for turnaround and restructuring with the consulting firm AlixPartners. “They’re getting a very bad dose of reality right now.”
6:07 am Magnum Hunter (MHRC) reported that the a US District Bankruptcy Court has approved a variety of 'first day' motions related to its voluntary chapter 11 restructuring (:MHR) :
Collectively, the first day orders entered provide the Company with the ability to continue operating in the ordinary course while it continues to pursue a comprehensive financial restructuring. The Court approved motions that give the Company the ability to, among other things, pay employee wages and benefits without interruption throughout the restructuring process, continue its current cash management program, continue making royalty payments to mineral owners, and pay pre-bankruptcy claims to certain of the Company's oil and gas vendors.
Importantly, the Court approved the Company's debtor-in-possession financing on an interim basis. The DIP Financing generally provides for a $200 million senior and junior secured multi-draw term loan, approximately $40 million of which was made available upon entry of the interim order
Global Credit Research - 15 Dec 2015
Approximately $940 million of rated debt affected
New York, December 15, 2015 -- Moody's Investors Service (Moody's) downgraded Magnum Hunter Resources Corporation's (MHR) Probability of Default Rating (PDR) to D-PD from Caa3-PD, Corporate Family Rating (CFR) to Ca from Caa3, senior secured second-lien term loan rating to Ca from B3, and the senior unsecured notes rating to C from Ca. The negative outlook and the SGL-4 Speculative Grade Rating were maintained.
These actions were prompted by an announcement on December 15, 2015 that MHR and certain of its wholly-owned subsidiaries had filed voluntary petitions for reorganization under Chapter 11 of the US Bankruptcy Code in the state of Delaware.
Issuer: Magnum Hunter Resources Corporation
....Probability of Default Rating, Downgraded to D-PD from Caa3-PD
....Corporate Family Rating, Downgraded to Ca from Caa3
....US$600M 9.75% Senior Unsecured Bond/Debenture, Downgraded to C (LGD5) from Ca (LGD5)
....US$340M Senior Secured 2nd Lien Term Loan, Downgraded to Ca (LGD4) from B3 (LGD2)
....Speculative Grade Liquidity Rating, SGL-4
....Outlook, Negative Outlook
The article was dated January 10, 2015
Barron's: Natural Gas Overtakes Coal for Electricity Production
July 13, 2015, 12:06 P.M. ET
Sentiment: Strong Buy