NEW YORK ( The Deal) -- Pipemaker Boomerang Tube LLC wants permission to drill into $145 million in debtor-in-possession financing to address its immediate liquidity issues.
The Chesterfield, Mo., company filed the DIP motion alongside its Chapter 11 petition in the U.S. Bankruptcy Court for the District of Delaware on Tuesday, June 9. Subsidiaries BTCSP LLC and BT Financing also filed petitions.
Judge Mary F. Walrath is scheduled on Wednesday to consider first-day motions, including requests for interim use of the DIP funding and for joint administration of the cases.
The post-petition financing would consist of a $60 million new-money term loan provided by a group of prepetition term lenders and an $85 million asset-based loan provided by Wells Fargo Capital Finance and Bank of America. Cortland Capital Market Services would serve as administrative agent on the term loan, while Wells Fargo would serve as administrative agent on the ABL.
The term loan would be priced at Libor plus 11% or an alternate base rate plus 10%, while the ABL would be priced at Libor plus 4.5% or a base rate plus 2.5%. The term loan would carry a 2% commitment fee and a $35,000 administrative agency fee. The ABL would have a $300,000 fee as well as an unused commitment fee of 0.375% to 0.5%, depending on usage of the loan.
The term loan DIP would mature on the earliest of Oct. 7, the sale of the debtor's assets and the effective date of a Chapter 11 plan. The ABL would mature on the earliest of Nov. 6, the closing of a sale of all the debtor's assets and a plan effective date.
The ABL gradually would roll up the $33 million outstanding on a prepetition revolver, and the term loan would repay a $6.6 million bridge loan provided by certain term lenders.
The DIP package would be the first step in a planned restructuring for Boomerang, also known as Oilfield Tubulars.
On Tuesday, the debtors and their prepetition lenders entered into a plan support agreement. The deal would cut Boomerang's funded debt obligations by converting the roughly $214 million in prepetition term-loan obligations into 100% of the reorganized debtor's common stock and $55 million in subordinated notes.
The term lenders also have agreed to backstop a $60 million exit facility that Boomerang would use to pay down the term loan DIP obligations. Those backstop lenders that agree to provide the exit facility would be entitled to up to 20% of the reorganized debtor's equity, which would dilute the stake held by all of the term lenders.
Boomerang as of Tuesday afternoon had not filed the PSA with the court or sought approval of the agreement.
In a Tuesday declaration, chief restructuring officer, interim CEO and President Kevin Nystrom said Boomerang manufactures oil country tubular goods. Drillers use the products, which include drill pipe, casing and tubing, in exploration and production of oil and natural gas.
Nystrom, also a managing director at Zolfo Cooper Management LLC, blamed the company's Chapter 11 filing on a struggling oil and gas industry.
"The industry has been hit hard by a swift and drastic drop in crude oil prices primarily as a result of an oversupplied global market and the strengthening of the U.S. dollar," the declaration said.
West Texas Intermediate crude oil prices dropped from $107 per barrel in June 2014 to a low of $44 per barrel in January, a nearly 60% decline. As a result, members of the Organization of the Petroleum Exporting Countries have seen daily losses of $1.5 billion. Exploration and production companies have slashed capital budgets, which has in turn affected distributors and service providers.
Boomerang Tube's revenue was down 62% in the first quarter of 2015 compared with the previous quarter, the declaration said.
The company began cutting costs in 2014, and in January it hired Zolfo Cooper to help it explore strategic alternatives.
"Despite current oil industry economics, the debtors continued to meet their revenue projections for February through May of this year and anticipate that the industry will begin to recover in the second half of this year," Nystrom said. "The precise timing of recovery, however, will be driven by oil prices, related drilling activity and the supply and demand dynamics of the domestic [oil country tubular goods] industry."
On March 4, the debtor received a notice of default on its ABL facility related to the violation of certain financial covenants under the agreement. Boomerang then began talks with Wells Fargo and the lenders on a PSA. (The lenders agreed to forbear on the debt for a time.)As of March 31, Boomerang had $299 million in assets and $461 million in liabilities.
On Oct. 11, 2012, the debtor entered into an agreement with Wells Fargo for an $85 million revolver. On the same date, Boomerang entered into a $230 million term loan agreement with a group of lenders. The loans respectively mature on Aug. 11, 2017, and Oct. 11, 2017.
On April 6, the debtor entered into a $6.2 million bridge loan agreement with certain term lenders. The facility matured on Friday.
In addition to its secured debt, the company owes trade creditors about $37.3 million. The company's largest unsecured creditors include Nucor (NU) (owed $17.48 million), Daewoo ($3.13 million), Pinnacle Works ($2.48 million), Patterson Tubular Services ($2.02 million) and GB Tubulars ($811,160).
Nystrom and debtor counsel Robert S. Brady at Young, Conaway, Stargatt & Taylor LLP could not immediately be reached for comment Tuesday.