December 8, 2020 – The Debtors filed a Modified Second Plan of Reorganization with a redline showing changes to the version filed on November 1, 2020 [Docket No. 350] and separately filed a motion requesting Court approval of the modified Plan without otherwise needing to resolicit stakeholders for approval. 

The modifications reflect a recently achieved settlement with the Debtors' "Ad Hoc Committee of Term Lenders" (see further below) which, the Debtors argue, does not otherwise "alter the placement of any claim or interest in a particular class under the Plan;" and the Debtors are asking the Court to affirm their view that the changes do "not adversely affect the recovery for any Holder of a Claim in Class 4 (Credit Agreement Claims) or Class 5 (Term Loan Claims) [Docket No. 351].

The Debtors have also filed their memorandum of law in support of Plan confirmation (the "Memorandum") [Docket No. 353] and asked the Court for emergency relief so that they can proceed (as planned) with their December 10th Plan confirmation hearing.

Plan Changes

The Memorandum outlines changes made in the latest iteration of the Plan to reflect an agreement reached with an Ad Hoc Committee of Term Lenders. Specifically, the Memorandum states, "The Confirmation Order includes certain modifications to the Plan to address formal and informal objections raised by various parties. The Debtors submit that none of the Plan modifications, including a payment by the Debtors of $625,000 to the Ad Hoc Committee of Term Lenders on the Effective Date, will adversely affect the treatment of those Classes of Claims that voted to accept the Plan."

Specifically, according to the motion requesting approval to modify the Plan, "The Debtors have been engaged in settlement discussions concerning potential objections to the Plan raised by Nebari Holdings LLC, Tegean Capital Management LLC and Morgan Stanley Investment Management Inc. (collectively, the 'Ad Hoc Committee of Term Lenders') and recently agreed to terms on a settlement to resolve their objections (the 'Settlement') [Docket No. 334], which was filed and noticed prior to the Voting Deadline….

Accordingly, the Debtors propose to modify the Plan to reflect the Settlement by adding the following language to Article IV.Q of the Plan (the 'Plan Modification'): Pursuant to Bankruptcy Rule 9019, to resolve the Ad Hoc Committee of Term Lenders’ potential objections to the Plan, on the Effective Date the Ad Hoc Committee of Term Lenders shall receive a payment in the amount of $625,000.00."

The Debtors' amended Plan also addresses an outstanding SEC objection, discussed further below.

Plan Overview

The Memorandum [Docket No. 353] notes, “The Debtors commenced the chapter 11 cases (the ‘Chapter 11 Cases’) to implement a restructuring through their pre negotiated Plan. The Plan reduces the Debtors’ prepetition debt by approximately $74 million and deleverages their balance sheet. The Debtors began the case with the support of almost all of the holders of the Debtors’ secured debt under the Prepetition Credit Agreement, the Prepetition Term Loan Agreement and the Prepetition Convertible Notes, who have documented their support for the restructuring and the Chapter 11 Cases through a restructuring support agreement (‘Restructuring Support Agreement’).

Pursuant to the Plan negotiated with the Consenting Creditors, the Debtors’ reorganization includes: (i) entry into a first lien exit term loan facility (‘First Lien Exit Facility’) in an aggregate principal amount of $15 million; (ii) conducting a rights offering (‘Rights Offering’) pursuant to which all eligible Prepetition Credit Agreement Lenders and Prepetition Term Loan Lenders were offered the opportunity to purchase loans to be advanced under the First Lien Exit Facility and equity in reorganized SAE, in each case in the amounts in accordance with the Rights Offering Procedures and the Plan, with the Rights Offering backstopped by certain of the Consenting Credit Agreement Lenders and the Consenting Term Loan Lenders, pursuant to the Backstop Commitment Agreement (as amended, the ‘Backstop Agreement’); (iii) the entry into a Second Lien Exit Facility (the ‘Second Lien Exit Facility’) in an aggregate amount of $20.5 million; (iv) the conversion of Prepetition Term Loan Claims to new equity in a reorganized SAE; and (v) the grant of a new Management Incentive Plan (the ‘Management Incentive Plan’).

The Classes entitled to vote on the Plan (Classes 4 and 5) voted overwhelmingly to accept the Plan, with 100% in amount and number of the Holders of Class 4 Claims voting to accept the Plan, and 100% in amount and number of the Holders of Class 5 Claims voting to accept the Plan.”

The amended Disclosure Statement [Docket No. 274] provides: “The key elements of the Plan include: 

• Prepetition Credit Agreement Lenders, Prepetition Term Loan Lenders and Prepetition Convertible Noteholders receive the New Equity, First Lien Exit Facility and Second Lien Exit Facility. 

1. The Prepetition Credit Agreement Lenders will exchange their debt for $20.5 million for (i) their Pro Rata share (measured by reference to the aggregate amount of Allowed Credit Agreement Claims) of participation in the Second Lien Exit Facility in an amount equal to such Allowed Credit Agreement Claim; (ii) the right to purchase pursuant to the Rights Offering up to their Pro Rata share (measured by reference to the aggregate amount of Allowed Credit Agreement Claims and the aggregate amount of Allowed Term Loan Claims) of (A) the term loans under the First Lien Exit Facility and (B) the New First Lien Exit Facility Equity; and (iii) the payment in full in Cash on the Effective Date of all Accrued Interest as of the Effective Date. 
2. The Prepetition Term Loan Lenders will exchange their debt for (i) their Pro Rata share (measured by reference to the aggregate amount of Allowed Term Loan Claims) of 100% of the New Equity under the Plan, subject to dilution by the (a) New First Lien Exit Facility Equity, (b) New Equity issued pursuant to the First Lien Exit Facility Put Option Premium, and (c) awards related to the New Equity issued under the Management Incentive Plan, and (ii) the right to purchase pursuant to the Rights Offering up to their Pro Rata share (measured by reference to the aggregate amount of Allowed Term Loan Claims and the aggregate amount of Allowed Credit Agreement Claims) of (A) the term loans under the First Lien Exit Facility and (B) the New First Lien Exit Facility Equity.
3. The Prepetition Convertible Noteholders Claims shall be discharged, canceled, and released, and extinguished as of the Effective Date and shall be of no further force or effect, and Holders of Convertible Notes Claims shall not receive any distribution on account of such Convertible Notes Claims. If approved by this Court, the Debtors’ restructuring will significantly reduce the Debtors’ debt load and associated cash interest expense, and provide them with additional liquidity to fund the Debtors’ continued operations. 

• Releases and Exculpation. The Plan includes mutual releases in favor of (a) the Debtors and certain of their related persons, professionals, and entities, and (b) the Consenting Creditors and their related persons, professionals, and entities. The Plan will also provide for the exculpation of the Debtors and certain of their related persons, professionals, and entities.”

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

• Class 1 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%
• Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%
• Class 3 (“Secured Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%
• Class 4 (“Credit Agreement Claims”) is impaired and entitled to vote on the Plan. The Credit Agreement Claims shall be Allowed in the aggregate principal amount of $20,500,000.00 (the “Allowed Credit Agreement Claims”), plus any accrued and unpaid prepetition and postpetition interest thereon (the “Accrued Interest”). Each Holder shall receive (i) its Pro Rata share (measured by reference to the aggregate amount of Credit Agreement Claims) of participation in the Second Lien Exit Facility in an amount equal to such Credit Agreement Claim; (ii) the right to purchase pursuant to the Rights Offering up to its Pro Rata share (measured by reference to the aggregate amount of Credit Agreement Claims and aggregate amount of Term Loan Claims) of the New First Lien Exit Facility Equity; and (iii) the payment in full in Cash on the Effective Date of all Accrued Interest as of the Effective Date.
• Class 5 (“Term Loan Claims”) is impaired and entitled to vote on the Plan. The Term Loan Claims shall be Allowed in the aggregate principal amount of $29,000,000.00 plus any accrued and unpaid interest thereon, fees, expenses and all other obligations arising under the Prepetition Term Loan Documents payable through the Petition Date. Each Holder shall receive (i) its Pro Rata share (measured by reference to the aggregate amount of Term Loan Claims) of 100% of the New Equity under the Plan, subject to dilution by the (a) New First Lien Exit Facility Equity, (b) New Equity issued pursuant to the First Lien Exit Facility Put Option Premium and (c) awards related to the New Equity issued under the Management Incentive Plan and (ii) the right to purchase pursuant to the Rights Offering up to its Pro Rata share (measured by reference to the aggregate amount of Term Loan Claims and the aggregate amount of Credit Agreement Claims) of (A) the term loans under the First Lien Exit Facility and (B) the New First Lien Exit Facility Equity.
• Class 6 (“Convertible Notes Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 0%.
• Class 7 (“PPP Loan Claim”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Will be reinstated on Effective Date.
• Class 8 (“General Unsecured Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 0%.
• Class 9 (“Section 510(b) Claims”) is impaired, deemed to reject and not entitled to vote on the Plan.
• Class 10 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan.
• Class 11 (“Intercompany Interests”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan.
• Class 12 (“SAE Holdings Interests”) is impaired, deemed to reject and not entitled to vote on the Plan.

SEC Objection

Also noted in the Memorandum is a limited objection to the Plan filed by the Securities and Exchange Commission, which the Debtors have addressed in further modifications to the Plan.

In its limited objection (summarized in the Memorandum), the SEC sought to ensure that the Plan did not "(i) release or otherwise limit any non-debtor person or entity from any Claim, cause of action, proceeding or investigation; and (ii) preclude the SEC from pursuing and enforcing any claim or cause of action against the Debtors that is not subject to discharge under section 1141(d) of the Bankruptcy Code."

As a result, the confirmation order now includes language stating "Nothing in the Plan or this Confirmation Order shall affect the obligations of the Debtors, Reorganized Debtors and/or any transferee or custodian to maintain all books and records that are subject to any governmental subpoena, document, preservation letter or other investigative request for a period of four years after the Effective Date.

Notwithstanding any provision herein to the contrary, no provision of the Plan, or any order confirming the Plan, (i) releases any non-debtor person or entity (including any Release Party) from any Claim or cause of action of the United States Securities and Exchange Commission (the 'SEC'); (ii) enjoined, limits, impairs or delays the SEC from commencing or continuing any Claims, causes of action, proceedings or investigations against any non-debtor person or entity (including any Released Party) in any forum; or (iii) precludes the SEC from pursuing or enforcing any claim or causes of action against any of the Debtors that is not subject to discharge under section 1141(d) of the Bankruptcy Code."

As previously reported, the Debtors’ Third Amended Disclosure Statement [Docket No. 274] references a lawsuit filed by the SEC, stating, “On October 8, 2020, the Securities and Exchange Commission (the ‘SEC’) filed a complaint against SAE Holdings and its former executive officers Jeffrey Hastings, Brent Whiteley, Brian Beatty and Michael Scott (the ‘Former Executives’) in the U.S. District Court for the Southern District of New York captioned U.S. Securities and Exchange Commission, v. SAExploration Holdings, Inc. et al. Civil Action No. 1:20-CV-8423 (the ‘SEC Lawsuit’) arising out of the actions of the Former Executives…Section 13(b)(5) and Rule 13b2-1 thereunder, and Messrs. Hastings, Whiteley and Beatty with also violating Exchange Act Rules 10b-5(b), 13a-14, and 13b2-2. The SEC seeks a permanent injunction against violations of the aforementioned provisions against SAE Holdings and does not seek any monetary relief. From the Former Executives, the SEC also seeks permanent injunctions as well as civil penalties, disgorgement of allegedly ill-gotten gains with prejudgment interest and officer-and-director bars against each of them. Additionally, the SEC seeks to have Messrs. Hastings, Whiteley and Beatty reimburse SAE Holdings for incentive-based compensation pursuant to Section 304(a) of the Sarbanes-Oxley Act of 2002. The Department of Justice, U.S. Attorney’s Office for the Southern District of New York (the ‘DOJ’) also announced criminal charges against Mr. Hastings in a parallel action. We have an agreement-in-principle to resolve the SEC Lawsuit as to SAE Holdings in which we would agree to the requested injunctions not to violate any of the above provisions.”

According to an SEC press release announcing the filing of the complaint, “The Securities and Exchange Commission today charged Houston-based seismic data company, SAExploration Holdings Inc. (SAE), and four former executives for a multi-year accounting fraud that falsely inflated the company’s revenue by approximately $100 million and concealed the theft of millions of dollars by the executives. SAE issued restated financial statements in February and declared bankruptcy in August."

The following Exhibits were attached to the Second Amended Disclosure Statement [Docket No. 139]:

• Exhibit A: Plan of Reorganization
• Exhibit B: Restructuring Support Agreement
• Exhibit C: Liquidation Analysis
• Exhibit D: Financial Projections
• Exhibit E: Valuation Analysis
• Exhibit F: Rights Offering Procedures

On December 8, 2020, the Debtors filed Amended Exhibits to the Plan Supplement [Docket No. 356] and attached: 

• Exhibit A: Form of New Organizational Documents
• Exhibit B: Term Loan and Security Agreement
• Exhibit F: Form of Management Incentive Plan
• Exhibit G: Identity of New Boards and Senior Management
• Exhibit I: Employment Agreements

Liquidation Analysis (see Exhibit C to Disclosure Statement [Docket No. 274] for notes)

About the Debtors

According to the Debtors: “SAE is an international oilfield services company offering a full range of vertically-integrated seismic data acquisition, data processing and interpretation, and logistical support services throughout North America, South America, Asia Pacific, Africa and the Middle East. In addition to the acquisition of 2D, 3D, time-lapse 4D and multi-component seismic data on land, in transition zones and offshore in depths reaching 3,000 meters, SAE offers a full suite of data processing and interpretation services utilizing its proprietary, patent-protected software, and also provides in-house logistical support services, such as program design, planning and permitting, camp services and infrastructure, surveying, drilling, environmental assessment and reclamation and community relations. SAE operates crews around the world, performing major projects for its blue-chip customer base, which includes major integrated oil companies, national oil companies and large independent oil and gas exploration companies. With its global headquarters in Houston, Texas, SAE supports its operations through a multi-national presence in the United States, United Kingdom, Canada, Peru, Colombia, Bolivia, Malaysia and Singapore.”

Read more Bankruptcy News