The Houston-based onshore oil and natural gas exploration and production company announced late Wednesday, May 18, that it has reached an agreement with its noteholders on the terms of a plan to restructure its balance sheet through a prepackaged bankruptcy filing.
The plan term sheet is with certain holders of the company's $1.02 billion in 13% third-lien notes due Feb. 15, 2022; $315.5 million in 9.75% senior unsecured notes due July 15, 2020; $297.2 million in 8.875% senior unsecured notes due May 15, 2022; $37.2 million in 9.25% senior unsecured notes due Feb. 15, 2022; $267.75 million in 8% convertible senior unsecured notes due Feb. 8, 2020; 5.75% perpetual convertible preferred stock.
Halcon said in a statement on Wednesday that the restructuring will reduce its debt by $1.8 billion and eliminate $222 million of preferred equity. It will also reduce its annual interest expense by more than $200 million.
The company's stock, which trades on the New York Stock Exchange, was down over 72% on Thursday morning at 26.1 cents, after closing at 97 cents on Wednesday.
Under the plan, the company's existing common stock holders will receive a 4% stake in the company's reorganized equity.
Through the plan, the company's $700 million in 8.625% senior secured second-lien notes due Feb. 1, 2020 and its $112.8 million in new 12% second-lien senior notes due Feb. 15, 2022 will be reinstated.
Halcon's $1.5 billion senior secured revolving credit agreement with a borrowing base of $700 million, will be replaced with a new or amended reserve-based facility from its existing lenders.
The current revolver matures on Aug. 1, 2019, and is priced at a base rate plus 150 basis points to 250 basis points or Libor plus 250 basis points to 350 basis points. JPMorgan Chase Bank is the administrative agent on the revolver.
As of March 31, Halcon owed $157 million on the revolver and had $4.7 million in outstanding letters of credit, giving it the ability to borrow $538.3 million.
Under the plan, the holders of the company's 1.02 billion in 13% third-lien notes due Feb. 15, 2022 will receive a 76.5% stake in the company's reorganized equity and $50 million in cash.
The company just issued the third-lien notes in September in exchange for $1.57 billion of unsecured notes.
The unsecured noteholders will receive a 15.5% stake in the company's reorganized equity, as well as warrants for a 4% stake in its reorganized equity and $37.6 million in cash.
Its convertible noteholders, meanwhile, will receive a 4% stake in the company's reorganized equity, plus warrants for another 1% equity stake and $15 million in cash.
Finally, preferred equity holders will receive $11.1 million in cash.
The company is currently negotiating the final restructuring support agreement documents for the reorganization plan, which will be executed through a prepackaged Chapter 11 filing.
Last year, Halcon also did a series of debt-for-equity swaps, converting $258 million of its unsecured notes into 144.8 million shares of common stock. The transactions were done with noteholders including Union Square Park Partners, Pioneer Investments, JPMorgan Securities, Goldman Sachs Asset Management and Franklin Templeton Investment.
According to the company's most recent financial report, dated May 9, it had $8.6 million in cash on its balance sheet as of March 31.
The company reported a $539.99 million net loss for the three months ending March 31.
Halcon operates in the Bakken and Three Forks formations in North Dakota and the Eagle Ford shale formation in East Texas.
The company's senior vice president of finance and investor relations, Quentin Hicks, could not immediately be reached for comment on Thursday morning.