November 4, 2020 – The Debtors filed a Second Amended Plan of Reorganization and a elated Disclosure Statement [Docket Nos. 988 and 989, respectively], and separately filed blacklines of each showing changes to the versions filed on October 22nd [Docket No. 990]. 

On November 3rd, the Debtors' Official Committee of Unsecured Creditors (the “Committee”) filed an objection to the Debtors’ Disclosure Statement and proposed solicitation procedures; arguing that (i) the Disclosure Statement is informationally deficient, (ii) the Plan "patently unconfirmable" and (iii) the Debtors have simply run out of time to provide creditors with adequate notice of what is a moveable feast in advance of the scheduled November 5th hearing to confirm the Disclosure Statement [Docket No. 955]. 

In its objection (see further below), the Committee acknowledged that the Debtors were preparing an amended Plan and Disclosure Statement in part to adress the Committee's concerns. Did the amendments go far enough?

The amended documents add significant new disclosure in areas the Committee had highlighted as deficient, including disclosure on the “dilutive” rights issue, the Debtors “Backstop Commitment Agreement” and the terms of exit financing (the Disclosure Statement adds a term sheet on that $proposed $1.0bn financing at Exhibit G).

The amended Plan also makes significant changes to treatment of Class 7 (“Existing Preferred Interests ”) and Class 8 (“Existing Common Interests”).

Overview of the Plan

The Disclosure Statement [Docket No. 883] notes, “The Debtors entered into the Restructuring Support Agreement, attached hereto as Exhibit B, with over 80% of the Senior Noteholders on the Petition Date. After careful evaluation, the Revolving Credit Agreement Lenders declined to join the Restructuring Support Agreement; however, a subset of the Revolving Credit Agreement Lenders continued to work to provide the DIP financing (as described below) and all Revolving Credit Agreement Lenders worked to provide consensual use of cash collateral upon filing. The Restructuring Support Agreement and subsequent restructuring term sheet outline the terms of a consensual restructuring of the Debtors’ funded debt obligations through the Plan. The Debtors will continue their efforts to garner additional support for the Plan and anticipate that additional Senior Noteholders and other stakeholders will execute the Restructuring Support Agreement or formally support the Plan in advance of Confirmation.

The Plan provides for the restructuring of the Debtors through a Stand-Alone Restructuring. The Debtors contemplated a dual-track process that included a Combination Transaction, but ultimately determined the Stand-Alone Restructuring was the superior path forward. The key terms of the Plan are as follows:

The Stand-Alone Restructuring

On the Effective Date, (i) Reorganized XOG shall issue the New Common Shares and the New Warrants to fund distributions to certain Holders of Claims and Interests in accordance with Article III of the Plan, (ii) Reorganized XOG shall enter into the Exit Facility, which shall be a new credit facility and/or term loan in an amount sufficient to pay on the Effective Date certain Holders of Claims as set forth in Article III of the Plan, and to provide incremental liquidity and (iii) the New Board shall be authorized to implement the Management Incentive Plan.

The Reorganized Debtors will fund distributions under the Plan with Cash on hand on the Effective Date, the revenues and proceeds of all assets of the Debtors, including proceeds from all Causes of Action not settled, released, discharged, enjoined or exculpated under the Plan or otherwise on or prior to the Effective Date, the Exit Facility, the Equity Rights Offering, the New Common Shares and the New Warrants.

All Executory Contracts or Unexpired Leases not previously assumed, assumed and assigned or rejected in the Chapter 11 Cases, shall be deemed assumed by the Reorganized Debtors, effective as of the Effective Date, in accordance with the provisions and requirements of sections 365 and 1123 of the Bankruptcy Code, and regardless of whether such Executory Contract or Unexpired Lease is set forth on the Schedule of Assumed Executory Contracts and Unexpired Leases, other than: (1) those that are identified on the Schedule of Rejected Executory Contracts and Unexpired Leases; (2) those that have been previously rejected by a Final Order; (3) those that are the subject of a motion to reject Executory Contracts or Unexpired Leases that is pending on the Confirmation Date; or (4) those that are subject to a motion to reject an Executory Contract or Unexpired Lease pursuant to which the requested effective date of such rejection is after the Effective Date; provided that notwithstanding anything to the contrary herein, no Executory Contract or Unexpired Lease shall be assumed, assumed and assigned, or rejected without the reasonable consent of the Required Consenting Senior Noteholders; provided, further, that the Debtors shall consult with the DIP Agent regarding the assumption, assumption and assignment or rejection (or related settlement) of any Executory Contract or Unexpired Lease.”

The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are in the Plan and/or Disclosure Statement, with changes in bold; also see liquidation analysis below):

• Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The Debtors’ estimated recovery with GUC Equity Rights Offering / without GUC Equity Rights Offering is 100% and Liquidation Recovery is 100%.
• Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The Debtors’ estimated recovery with GUC Equity Rights Offering / without GUC Equity Rights Offering is 100% and Liquidation Recovery is 100% and Liquidation Recovery is N/A.
• Class 3 (“Revolving Credit Agreement Claims”) is impaired and entitled to vote on the Plan. The Debtors’ estimated recovery with GUC Equity Rights Offering / without GUC Equity Rights Offering is 100% and Liquidation Recovery is 72.4%.  Each Holder of a Revolving Credit Agreement Claim shall receive either: (i) if such Holder elects to participate in the Exit RBL Facility on a pro rata basis, determined on a ratable basis with respect to its percentage of the Obligations (as defined in the Revolving Credit Agreement) under the Revolving Credit Agreement, such Holder of a Revolving Credit Agreement Claim shall become an Exit RBL Facility Lender in accordance with the terms of the Exit RBL Facility Documents; or (ii) if such Holder does not elect to participate in the Exit RBL Facility as provided above (including by not making any election with respect to the Exit RBL Facility on the ballot), its Pro Rata Share of the Exit Term Loans.
• Class 4 (“Senior Notes Claims”) is impaired and entitled to vote on the plan. The Debtors’ estimated recovery with GUC Equity Rights Offering / without GUC Equity Rights Offering is 25.9% / 24.4% and Liquidation Recovery is 0.00%.  Each Holder of a Senior Notes Claim shall receive its Pro Rata share of (A) the Claims Equity Allocation and (B) the Senior Noteholder Subscription Rights.
• Class 5 (“Trade Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The Debtors estimated recovery with GUC Equity Rights Offering / without GUC Equity Rights Offering is 100% and Liquidation Recovery is 0.00%.
• Class 6 (“General Unsecured Claims”) is impaired and entitled to vote on the plan. The Debtors’ estimated recovery with GUC Equity Rights Offering / without GUC Equity Rights Offering is 16.7% / 19.5% and Liquidation Recovery is 0.00%. Each Holder of an Allowed General Unsecured Claim will receive in full and final satisfaction, compromise, settlement, release, and discharge of, and in exchange for such Allowed General Unsecured Claim, its Pro Rata share of of: (i) the Claims Equity Allocation; and (ii) the GUC Subscription Rights, subject to Article IV.E.4 of the Plan; provided that each GUC Cash Out Holder will receive, in lieu of the GUC Subscription Rights, Cash in an amount equal to 40% of the value of such Holder’s GUC Subscription Rights.
• Class 7 (“Existing Preferred Interests”) is impaired and entitled to vote on the plan. The Debtors’ estimated recovery with GUC Equity Rights Offering / without GUC Equity Rights Offering is 6% / 3.3% and Liquidation Recovery is 0.00%. Each Existing Preferred Interest shall be canceled, released, and extinguished, and will be of no further force or effect. Each Holder of an Allowed Existing Preferred Interest shall receive, in full and final satisfaction, compromise, settlement, release, and discharge of, and in exchange for such Existing Preferred Interest, its Pro Rata share of (A) 50% of the Existing Interests Equity Allocation, (B) the Existing Preferred Interest Subscription Rights, (C) 50% of the Tranche A Warrants, and (D) 50% of the Tranche B Warrants; provided that if Class 3, 4, 6, or 8 votes to reject the Plan, Holders of Allowed Existing Preferred Interests shall receive no distribution and any Existing Preferred Interest Subscription Right shall be canceled.
• Class 8 (“Existing Common Interests”) is impaired and entitled to vote on the plan. The Debtors’ estimated recovery with GUC Equity Rights Offering / without GUC Equity Rights Offering is N/A and Liquidation Recovery is N/A. Each Existing Common Interest shall be cancelled, released and extinguished and will be of no further force or effect, and each Holder of an Existing Common Interest shall receive its Pro Rata share of (A) 50% of the Existing Interests Equity Allocation, (B) the Existing Common Interest Subscription Rights, (C) 50% of the Tranche A Warrants and (D) 50% of the Tranche B Warrants; provided that if Class 3, 4, 6, or 7 votes to reject the Plan, Holders of Allowed Existing Common Interests shall receive no distribution and any Existing Common Interest Subscription Right shall be canceled.
• Class 9 (“Other Equity Interests”) is impaired, deemed to reject and not entitled to vote on the plan. The Debtors’ estimated recovery with GUC Equity Rights Offering / without GUC Equity Rights Offering is 0.00% and Liquidation Recovery is 0.00%.
• Class 10 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. Expected recovery is 0%/100%.
• Class 11 (“Intercompany Interests”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. Expected recovery is 0%/100%.
• Class 12 (“Section 510(b) Claims”) is impaired, deemed to reject and not entitled to vote on the plan. Estimated recovery is N/A.

The following documents were attached to the Disclosure Statement [Docket No. 989]:

• Exhibit A: Plan (filed separately at Docket No. 988)
• Exhibit B: Restructuring Support Agreement
• Exhibit C: Liquidation Analysis
• Exhibit D: Disclosure Statement
• Exhibit E: Financial Projections
• Exhibit F: Valuation Analysis
• Exhibit G: Exit RBL Facility Term Sheet

Prepetition Indebtedness

 As of the Petition date, the Debtors’ capital structure included outstanding funded-debt obligations in the aggregate principal amount of approximately $1.75bn, comprised of: (i) $650.0mn of outstanding loans under the Prepetition RBL Facility with a $650.0mn borrowing base, (ii) $400.0m in outstanding principal amount of its 2024 Senior Notes, and (iii) $700.2mn in outstanding principal amount of its 2026 Senior Notes.

Outstanding Debt Obligations

Liquidation Analysis (See Exhibit C to Disclosure Statement [Docket No. 989] for notes)

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