SAExploration Holdings, Inc. – Houston-Based Oilfield Services Company Files Chapter 11 Citing COVID-19, Depressed Oil Demand and Inability to Monetize Alaskan Tax Credits; RSA with Lenders and Noteholders Anticipates $74mn Debt Reduction

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August 27, 2020 – SAExploration Holdings, Inc. and four affiliated Debtors (OTC Pink: SAEX; “SAE” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 20-34306 (Judge Isgur). The Debtors, a Houston-based oilfield services company, are represented by John F. Higgins of Porter Hedges LLP. Further board-authorized engagements include (i) Imperial Capital, LLC as financial advisors, (ii) Winter Harbor LLC as investment banker and (iii) Epiq Corporate Restructuring, LLC as claims agent. 

The Debtors’ lead petition notes between 1 and 50 creditors; estimated assets between $1.0mn and $10.0mn; and estimated liabilities between $100.0mn and $500.0mn. The Debtors' Q2 2020 8-K noted assets of $100.0mn and liabilities of $133.3mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Wilimington Savings Fund (as Trustee for $60.0mn Convertible Notes due 2023), (ii) Texas Champions Bank ($6.8mn PPP Loan claim) and (iii) KUUPIK ($420k royalties claim). Seven of the top 13 unsecured creditors are law firms holding legal fee claims.

In a press release announcing the filing, SAE advised that it had: “entered into a Restructuring Support Agreement (the 'RSA') with holders of 100% of the advances under its credit facility, holders of approximately 82.4% of the advances under its senior loan facility and holders of 100% of its outstanding 6.0% Senior Secured Convertible Notes due 2023 (the “Convertible Notes”). The parties to the RSA also hold in the aggregate approximately 67.4% of the outstanding equity interests of the Company (including outstanding warrants, but excluding outstanding the Convertible Notes) on a fully diluted basis….[SAE] has proposed to consummate the Plan and emerge from chapter 11 before the end of November 2020."

Mike Faust, SAE’s CEO, commented further: “After several months of careful consideration of how best to navigate the uncertainty of the global economy due to the coronavirus pandemic, along with the decreased demand for oil, our debt levels, and the difficulties associated with monetizing Alaskan tax credits, SAE’s Board of Directors and management, along with our advisors, concluded that the best path forward for SAE and its stakeholders is to seek Chapter 11 protection. Our industry has been hit hard.”

Plan Overview

According to the press release: "The proposed plan of reorganization (the 'Plan') would eliminate approximately $74 million, net in debt from the Company’s balance sheet. The Plan contemplates 

(i) the entry into a new first lien exit facility in an aggregate principal amount of $15.0 million with lenders under the existing credit facility, senior loan facility and Convertible Notes

(ii) the refinancing of the existing credit facility with a new second lien exit facility in an aggregate principal amount of $20.5 million with the existing lenders, and 

(iii) the elimination of $89.0 million of principal plus accrued interest with respect to the existing senior loan facility and the Convertible Notes, in exchange for new common stock to be issued by the reorganized Company, subject to dilution by (x) new common stock to be issued to the lenders under the new first lien exit facility that will represent 95% of the outstanding new common stock to be issued by the reorganized Company, and (y) new common stock to be issued to the parties backstopping the new first lien exit facility that will represent 2.5% of the outstanding new common stock to be issued by the reorganized Company. 

The new common stock to be issued by the reorganized Company will be subject to further dilution by new common stock to be issued by the reorganized Company in connection with a management incentive plan."

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are 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.
  • Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 3 (“Secured Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 4 (“Credit Agreement Claims”) is impaired and entitled to vote on the Plan. Expected recovery is 65%-70%. Each Holder shall receive (i) its Pro Rata share 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 its Pro Rata share (measured by reference to the aggregate amount of Allowed Credit Agreement Claims) of 78% 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.
  • Class 5 (“Term Loan Claims”) is impaired and entitled to vote on the Plan. Expected recovery is 1.6% – 3.0%. Each Holder shall receive (i) its Pro Rata share (measured by reference to the aggregate amount of Allowed Term Loan Claims) of 60% 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 Allowed Term Loan Claims) of 12.5% 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 and entitled to vote on the Plan. Expected recovery is .5% – 1%. Each Holder shall receive (i) its Pro Rata share (measured by reference to the aggregate amount of Allowed Convertible Notes Claims) of 40% 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 Allowed Convertible Notes Claims) of 9.5% of (A) the term loans under the First Lien Exit Facility and (B) the New First Lien Exit Facility Equity.
  • 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 and entitled to vote on the Plan. Expected recovery is 9.1% –
  • 11.1%. Each Holder will receive from the General Unsecured Claims Distribution, the lesser of (i) payment in full in Cash of the unpaid portion of such Allowed General Unsecured Claim, and (ii) its Pro Rata share of the General Unsecured Claims Distribution on the Effective Date.
  • 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.

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Faust Declaration”), Michael Faust, the Debtors’ Chairmen and CEO , detailed the events leading to SAE’s Chapter 11 filing. The Faust Declaration provides: “Although the Debtors generated net income and cash from operating activities in the first six months of 2020, they have reported recurring losses from operations and have not generated cash from operating activities for the six years ended December 31, 2019, and as of June 30, 2020, the Debtors had a stockholders’ deficit of $33.2 million. The Debtors anticipate negative cash flows from operating activities to begin to occur again in the second half of 2020 and continue for the foreseeable future due to, among other things, the significant uncertainty in the outlook for oil and natural gas development as a result of the significant decline in oil prices since the beginning of 2020 due to the COVID–19 coronavirus pandemic and its impact on the worldwide economy and global demand for oil. Due to these market conditions, certain of the Debtors scheduled or anticipated projects have been cancelled or delayed and there is no assurance as to when they may resume, if at all.”

Significant Shareholders

  • Whitebox Advisors LLC: 35.34%
  • DuPont Capital Management Corp.: 15.25%

The following documents were attached to the Disclosure Statement:

  • 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

Liquidation Analysis (see Exhibit C to Disclosure Statement 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."

The Disclosure Statement adds: "While the results of the seismic surveys the Debtors conduct generally belong to their customers and are proprietary in nature, Alaskan Seismic Ventures, LLC (“ASV”), a related party variable interest entity, currently maintains a multiclient seismic data library of approximately 440 square kilometers in certain basins in Alaska which is available for future sale or license. Combined the Debtors and their non-debtor affiliates currently employ 132 full-time employees. The Debtors and their non-debtor affiliates also employ hourly and day-rate employees, but that number can fluctuate depending on: the time of year and the size and number of projects at the time."

Corporate Structure

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