Sable Permian Resources LLC – Files Amended Joint Chapter 11 Plan and Disclosure Statement to Reflect Settlement Agreement; Aims for January 29th Confirmation Hearing

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December 14, 2020 – The Debtors filed an Amended Joint Chapter 11 Plan and a related Disclosure Statement [Docket Nos. 662 and 663, respectively]; and separately filed redlines showing changes to the versions filed on December 1, 2020 [Docket No. 667]. Central to developments reflected in the amended Plan documents is a "Plan SettlementFN" which will leave (i) $11.0mn in cash (less wind-down expenses) for general unsecured creditors in Classes 10A and 10B and (ii) a $388k cash pool to be shared amongst creditors in Class 10C. Further to the settlement, the Debtors' RBL Credit Facility Lenders and DIP Credit Facility Lenders have agreed to waive recovery in respect of their deficiency claims sitting in Class 10C which (with generous rounding) will leave the remaining creditors in the class with a 1% recovery.

FN The Plan Settlement is amongst the Debtors, the Debtors' Official Committee of Unsecured Creditors (the “Committee”), JPMorgan Chase Bank, N.A., in its capacities as DIP Credit Facility Agent and RBL Credit Facility Agent (“JPM”), the Debtors’ senior management (“Management”), and Sable Management, LLC with terms as detailed in a settlement term sheet filed on December 10th at Docket No. 645.

On December 17, 2020, the Court hearing the Sable Permian Resources cases issued an order approving (i) the adequacy of the Disclosure statement (conditionally), (ii) Plan solicitation and voting procedures and (iii) a timetable culminating in a January 29, 2021 combined hearing on Plan confirmation and final approval of the Disclosure Statement [Docket No. 688].

Plan Overview

The Disclosure Statement [Docket No. 663] reads: “The Plan contemplates certain transactions, including, without limitation, the following transactions:

  • each Holder of an Allowed Other Secured Claim, including vendors with valid liens senior to the Credit Agreement Claims or Secured Notes Claims, shall receive in full and final satisfaction, settlement, discharge and release of, and in exchange for, such Allowed Other Secured Claim, at the election of the Plan Administrator (as directed by Reorganized Sable Land): (A) Plan Administration Cash equal to the amount of such Allowed Other Secured Claim or (B) such other less favorable treatment as to which the Plan Administrator, and the Holder of such Allowed Other Secured Claim shall have agreed upon in writing; provided, however, that Allowed Other Secured Claims incurred by any Debtor in the ordinary course of business may be paid in the ordinary course of business by the Plan Administrator from Plan Administration Cash or funds provided by Reorganized Sable Land, in accordance with the terms and conditions of any agreements relating thereto without further notice to or order of the Bankruptcy Court; provided, further, that if the Plan Administration Cash is insufficient to pay in full in Cash the obligations and liabilities for which such reserve was established, then Reorganized Sable Land shall, within five (5) Business Days of being notified by the Plan Administrator, pay such obligations and liabilities;
  • each Holder of an Allowed Other Priority Claim shall receive in full and final satisfaction, settlement, discharge and release of, and in exchange for, such Allowed Other Priority Claim, Plan Administration Cash equal to the amount of such Allowed Other Priority Claim; provided, however, that Other Priority Claims incurred by any Debtor in the ordinary course of business may be paid in the ordinary course of business by the Plan Administrator from Plan Administration Cash or funds provided by Reorganized Sable Land, in accordance with the terms and conditions of any agreements relating thereto without further notice to or order of the Bankruptcy Court; provided, further, that if the Plan Administration Cash is insufficient to pay in full in Cash the obligations and liabilities for which such reserve was established, then Reorganized Sable Land shall, within five (5) Business Days of being notified by the Plan Administrator, pay such obligations and liabilities;
  • each Holder of an Allowed DIP New Money Claim (or such Holder’s designee(s)) shall, in full and final satisfaction, settlement, discharge and release of, and in exchange for such Claim, receive its Class 3 Distribution;
  • each Holder of an Allowed DIP Roll-Up Claim (or such Holder’s designee(s)) shall, in full and final satisfaction, settlement, discharge and release of, and in exchange for such Claim, receive its Class 4 Distribution;
  • each Holder of an Allowed RBL Credit Facility Secured Claim (or such Holder’s designee(s)) shall, in full and final satisfaction, settlement, discharge and release of, and in exchange for such Claim, receive its Class 5 Distribution [including 100% of the emerged Debtors' equity];
  • each Holder of an Allowed Secured Notes Secured Claim shall, in full and final satisfaction, settlement, and release of, and in exchange for such Claim, receive its Pro Rata share of (i) the Secured Notes Cash Collateral remaining after the payment of Ad Hoc Group Fees and Expenses and the Secured Notes Indenture Trustee Fees and Expenses, in each case in accordance with the Plan; and (ii) the Secured Notes IP Recovery;
  • each Holder of an Allowed RBL Credit Facility Deficiency Claim, in full and final satisfaction, settlement, and release of, and in exchange for such Claim shall waive any distribution that such Holder otherwise would be entitled to receive on account of such Claim;
  • each Holder of an Allowed Secured Notes Deficiency Claim, in full and final satisfaction, settlement, and release of, and in exchange for such Claim, shall receive its Pro Rata share of the New Warrants;
  • each Holder of an Allowed Unsecured Notes Claim, in full and final satisfaction, settlement, and release of, and in exchange for such Claim, shall receive its Pro Rata share of the New Warrants;
  • Each Holder of an Allowed General Unsecured Claim against SPR, in full and final satisfaction, settlement, and release of, and in exchange for such Claim, shall receive its Pro Rata share of the SPR-SPR OpCo Distribution Pool;
  • each Holder of a General Unsecured Claim against SPR OpCo shall receive its Pro Rata share of the SPR-SPR OpCo Distribution Pool;
  • each Holder of a General Unsecured Claim against Sable Land shall receive its Pro Rata share of the Sable Land Cash Pool;
  • each Holder of a General Unsecured Claim against the Other Debtors shall not receive any distribution or retain any property on account of such General Unsecured Claim;
  • each Holder of an Intercompany Claim shall not receive any distribution or retain any property on account of such Intercompany Claim;
  • each Holder of an Intercompany Equity Interest shall not receive any distribution or retain any property on account of such Intercompany Equity Interest;
  • each Holder of an Existing Equity Interest shall not receive any distribution or retain any property on account of such Existing Equity Interest;
  • Holders of RBL Credit Facility Secured Claims will have the opportunity to become Effective Date Cash Out Sellers, thereby selling all or a portion of the New Common Equity such Holder would otherwise be entitled to receive under the Plan to the Effective Date Cash Out Buyers at a price to be set pursuant to the Effective Date Cash Out Procedures; and
  • the Plan Administrator shall be granted the authority and right on behalf of each of the Liquidating Debtors, without the need for Bankruptcy Court approval (except as otherwise set forth in the Plan), to carry out and implement all provisions of the Plan with regard to the Liquidating Debtors.” 

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

  • Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and expected recovery is 100%.
  • Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and expected recovery is 100%.
  • Class 3 (“DIP New Money Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $50,547,000 and expected recovery is 100%. 
  • Class 4 (“DIP Roll-Up Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $76,065,000 and expected recovery is 100%. Each Holder of an Allowed Class 4 Claim (or such Holder’s designee(s)) shall, in full and final satisfaction, settlement, discharge and release of, and in exchange for such Claim, receive its Class 4 Distribution. [“Class 4 Distribution” means, with respect to each Allowed Class 4 Claim, (a) if the Holder thereof is an Electing Loan Holder, such Holder’s Pro Rata share of Exit Facility Loans in the form of Tranche A Revolving Loans and (b) if the Holder thereof is a non-Electing Loan Holder, such Holder’s Pro Rata share of Exit Facility Loans in the form of Tranche B Term Loans.]
  • Class 5 (“RBL Credit Facility Secured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $500,483,000 and expected recovery is 100%.  Each Holder of an Allowed Class 5 Claim (or such Holder’s designee(s)) shall, in full and final satisfaction, settlement, discharge and release of, and in exchange for such Claim, receive its Class 5 Distribution. ["Class 5 Distribution” means, with respect to each Allowed Class 5 Claim, (a) if the Holder thereof is an Electing Loan Holder, such Holder’s Pro Rata share of (i) the New Common Equity Pool and (ii) Excess Exit Facility Loans in the form of Tranche A Revolving Loans, and (b) if the Holder thereof is a non-Electing Loan Holder, such Holder’s Pro Rata share of (i) the New Common Equity Pool [100% of the emerged Debtors' equity] and (ii) Excess Exit Facility Loans in the form of Tranche B Term Loans.]
  • Class 6 (“Secured Notes Secured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $767,834,000 and expected recovery is 100%.  Each Holder of an Allowed Class 6 Claim shall receive its Pro Rata share of (i) the Secured Notes Cash Collateral remaining after the payment of Ad Hoc Group Fees and Expenses and the Secured Notes Indenture Trustee Fees and Expenses, in each case in accordance with the Plan; and (ii) the Secured Notes IP Recovery.
  • Class 7 (“RBL Credit Facility Deficiency Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $500,483,000 and expected recovery is 0%.  Each Holder of an Allowed Class 7 Claim, in full and final satisfaction, settlement, and release of, and in exchange for such Claim shall waive any distribution that such Holder otherwise would be entitled to receive on account of such Claim.
  • Class 8 (“Secured Notes Deficiency Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $767,834,000 and expected recovery is >0%. Each Holder of an Allowed Class 8 Claim, in full and final satisfaction, settlement, and release of, and in exchange for such Claim, shall receive its Pro Rata share of the New Warrants.
  • Class 9 (“Unsecured Notes Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $37,800,000 and expected recovery is >0%. Each Holder of an Allowed Class 9 Claim, in full and final satisfaction, settlement, and release of, and in exchange for such Claim, shall receive its Pro Rata share of the New Warrants.
  • Class 10A (“General Unsecured Claims against SPR”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $44,153,000 and expected recovery is 0%-TBD. Each Holder of an Allowed Class 10A Claim, in full satisfaction, settlement, and release of, and in exchange for such Claim shall receive its Pro Rata share of the SPR-SPR OpCo Distribution Pool [ie $11.0mn less wind-up costs and up to $350k for indenture trustee fees].
  • Class 10B (“General Unsecured Claims against SPR OpCo”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $0 and expected recovery is 0%-TBD. Each Holder of an Allowed Class 10B Claim, in full satisfaction, settlement, and release of, and in exchange for such Claim shall receive its Pro Rata share of the SPR-SPR OpCo Distribution Pool [ie $11.0mn less wind-up costs and up to $350k for indenture trustee fees].
  • Class 10C (“General Unsecured Claims against Sable Land”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $70,060,000 and expected recovery is 1%. Each Holder of an Allowed Class 10C Claim, in full satisfaction, settlement, and release of, and in exchange for such Claim shall receive its Pro Rata share of the Sable Land Cash Pool [ie $388k in cash].
  • Class 10D (“General Unsecured Claims against the Other Debtors”) is impaired, deemed to reject and not entitled to vote on the plan. The aggregate amount of claims is $525k and expected recovery is 0%.
  • Class 11 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the plan. The aggregate amount of claims is $– and expected recovery is 0%.
  • Class 12 (“Intercompany Equity Interests”) is impaired, deemed to reject and not entitled to vote on the plan. The aggregate amount of claims is $– and expected recovery is 0%.
  • Class 13 (“Existing Equity Interests”) is impaired, deemed to reject and not entitled to vote on the plan. The aggregate amount of claims is $– and expected recovery is 0%.
  • Key Definitions:
    • Net Purchased Asset Cash” means any remaining Purchased Asset Cash held by the Plan Administrator upon completion of the Wind-Down and payment of all costs associated therewith, including payment of the Unsecured Notes Indenture Trustee Fees and Expenses up to the Unsecured Notes Indenture Trustee Fees and Expenses Maximum.
    • “Net Retained Avoidance Action Cash” means any proceeds of Retained Avoidance Actions, less all costs associated with the liquidation of such Retained Avoidance Actions.“
    • “New Common Equity Pool” means 100% of the New Common Equity issued and outstanding on the Effective Date prior to dilution by the New Incentive Plan Equity
    • “Purchased Asset Cash” means $11.0mn in Cash.
    • “Sable Land Cash Pool” means $388k, to be held, administered, and distributed by Reorganized Sable Land.
    • “SPR-SPR OpCo Distribution Pool” means, collectively, the Net Purchased Asset Cash and the Net Retained Avoidance Action Cash.
    • “Unsecured Notes Indenture Trustee Fees and Expenses Maximum” means up to $350k in Cash of the Purchased Asset Cash.

Plan Settlement

The Disclosure Statement provides: "Following extensive negotiations between the Debtors, JPMorgan (in its capacities as the Credit Agreement Agents), and the Committee (collectively, the ‘Settlement Parties’)…the Settlement Parties agreed on the principal terms of a comprehensive settlement (such terms, the ‘Settlement Term Sheet’), providing for, among other things, the RBL Credit Facility Lenders and DIP Credit Facility Lenders providing the Purchased Asset Cash [ie $11.0mn] to Reorganized Sable Land to facilitate the purchase of the Purchased Assets, the selection and duties of the Plan Administrator, the provision of the Transition Services, and releases by and for the putative defendants listed in the Standing Motion (the ‘Committee Settlement’). Under the Committee Settlement, the proposed recoveries to Holders of Allowed General Unsecured Claims will increase significantly from those proposed under the version of the Plan filed on December 1, 2020 [Docket No. 591] (the ‘Prior Plan’). Holders of Allowed General Unsecured Claims against Sable Land (Class 10C) will receive more under the Committee Settlement than they would have under the Prior Plan, as Holders of the RBL Credit Facility Deficiency Clams (Class 7) have agreed to waive any distribution to which such Holders would otherwise be entitled. Holders of Allowed General Unsecured Claims against SPR and SPR OpCo (Class 10A and Class 10B, respectively) will share Pro Rata in the SPR-SPR OpCo Distribution Pool. This recovery also represents an improvement over the Prior Plan, under which Holders of Allowed General Unsecured Claims against SPR and of SPR OpCo would not receive any distribution. 

Moreover, as explained in the Settlement Term Sheet filed with the Plan Support Letter Agreement, the distributions to Holders of Allowed General Unsecured Claims against SPR and SPR OpCo will be effectuated in accordance with the allocation of the Purchased Asset Cash between SPR and SPR OpCo. If not for the Committee Settlement, including such allocation as agreed to by the Settlement Parties, Holders of Allowed General Unsecured Claims against SPR and SPR OpCo would receive no distribution, as there are insufficient assets to pay all Administrative Expense Claims and Priority Claims prior to making any distribution to Holders of Allowed General Unsecured Claims against SPR and SPR OpCo, as required by the Bankruptcy Code.

Key Dates:

  • Deadline to file Plan Supplement: January 6, 2020
  • Voting Deadline: January 22, 2021
  • Objection Deadline for Plan and Disclosure Statement: January 22, 2021
  • Combined Hearing: January 29, 2021

Prepetition Indebtedness

As of the Petition date, the Debtors had approximately $575.0mn in revolving obligations and approximately $744.0mn in other long-term debt obligations, consisting of a series of first lien notes and two series of senior unsecured notes (all three series collectively, the “Existing Notes”). The Existing Notes were issued by Debtors SPR Finance and SPR FinCo and are not guaranteed by any of their affiliates. The following table illustrates the Debtors’ prepetition debt obligations:

Revolving Obligations

Outstanding Principal

Obligor

Collateral

Amended and Restated Credit Agreement

$574,910,140

Sable Land

First-priority liens on substantially all assets of Sable Land

Long-Term Debt Obligations

Outstanding Principal

Obligors

Collateral

12.000% senior secured first lien notes due 2024

$707,667,000

SPR Finance; SPR FinCo

First-priority liens on substantially all assets of SPR Finance and SPR FinCo (including equity of SPR FinCo and Sable Land)

7.125% senior notes due 2020

$27,075,000

SPR Finance; SPR FinCo

N/A

7.375% senior notes due 2021

$9,038,000

SPR Finance; SPR FinCo

N/A

Other Obligations

Approximate Amount

Obligors

Collateral

Other Obligations (trade, employees, etc.)

~$65,000,000

SPR OpCo (employee obligations); SPR (all other obligations)

Certain of the trade debt is secured by liens on certain of the Debtors’ wells

 

Recovery Summary and Liquidation Analysis (see Exhibit D of Disclosure Statement [Docket No. 663] for notes)

About the Debtors

The Debtors are an oil and natural gas company focused on the acquisition, exploration, development, and production of unconventional oil, natural gas, and natural gas liquid reserves in the Permian Basin of West Texas. Their operations are focused on oil and gas development in the Wolfcamp Shale play in the southern Midland Basin area within the Permian Basin. The Wolfcamp Shale underlying the Debtors’ acreage position contains substantial recoverable oil and natural gas reserves, which the Debtors believe exhibit repeatable, long-lived production profiles. 

The Debtors hold oil and gas leases comprising approximately 127,600 net acres. The Debtors directly operate approximately 97% of their net acreage. The remaining 3% net acreage is either (a) not currently operated by the Debtors or (b) subject to overriding royalty interests of the Debtors.

Corporate Structure Chart (See Docket No. 23)

https://assets.bankruptcydata.com/storyimages/EXNY6BBSC-20200626124333013930.jpg

 

 

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