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January 27, 2022 – Following "fruitful" negotiations with longtime Plan nemesis PanAm19 Holdings, LLC ("PanAm"), and the subsequent January 27th execution of a "Second Amended and Restated Restructuring Support and Lock-Up Agreement" with PanAm as signatory, the Debtors have now filed a Fourth Amended Plan and a related Disclosure Statement [Docket Nos. 392 and 393, respectively], and separately filed redlines of each showing changes to the versions filed on December 15th.
The Debtors have determined that the Plan will have to be resolicited as to Class 9 ("Existing Tenrgys Equity Interests"), and have therefore filed a motion requesting Court approval of (i) the adequacy of the amended Disclosure Statement, (ii) proposed Plan resolicitation and voting procedures and (iii) an expedited timetable culminating in a March 2, 2022 Plan confirmation hearing (the Debtors face a March 21, 2022 deadline for Plan effectiveness) [Docket No. 395].
Revised Plan Summary
The Debtors provide: "Following weeks of negotiations with the Debtors’ two largest creditors, the Debtors have developed a path to exit chapter 11 through a plan of reorganization supported by PanAm19 Holdings, LLC (‘PanAm’), FS/EIG Advisor, LLC, investment adviser to FS Energy and Power Fund, sole stockholder of FSEP Investments, Inc. (the ‘Consenting 2013 Loan Lender’), and Tellus Operating Group, LLC (‘TOG’).
Faced with a March 21, 2022 deadline for the conﬁrmed plan to go eﬀective, the Debtors have ﬁled, and are hereby seeking approval of the amended disclosure statement for the Debtors’ proposed consensual amended plan. The Debtors are also seeking approval of procedures to resolicit votes on the amended plan from the holders of prepetition equity interests in Debtor Tenrgys, LLC (‘Tenrgys’)—the only impaired class that has not aﬃrmatively consented to the new consensual plan.
Accordingly, this Motion seeks approval of a procedure designed to obtain conﬁrmation of the Fourth Amended Plan quickly and on timeline prescribed in the RSA while providing the holders of Existing Tenrgys Equity Interests suﬃcient notice of the Fourth Amended Disclosure Statement and Fourth Amended Plan and an opportunity to re-vote if they so desire.
The Plan provides for a comprehensive restructuring of the Company’s balance sheet and signiﬁcant investment of new capital in the Debtors’ business. The Plan is the result of extensive good-faith negotiations among the Debtors, PanAm, the Consenting 2013 Loan Lender, and TOG.
Under the non-consensual Third Amended Plan, the Debtors had proposed a restructuring featuring certain key elements, including:
- Payment in full of PanAm’s allowed secured claim of more than $71 million over ﬁve years with interest, with PanAm to retain its liens;
- Treatment of the Consenting 2013 Loan Lender’s allowed unsecured claim by (i) the payment of $500,000 cash on the eﬀective date, (ii) a new $20 million second-lien loan with a ﬁve-year maturity, and (iii) 35% of the equity in Reorganized Tenrgys;
- Retention by Existing Tenrgys Equity Interests of 65% of the equity in Reorganized Tenrgys;
- Payment in full or reinstatement of all other claims;
- A $5 million exit facility from members of the Debtors’ management for working-capital needs;
- A total of approximately $96 million in funded debt at emergence; and
- No apparent source(s) of funding for the development of the Colombian assets held by the Debtors’ non-Debtor subsidiary Telpico, LLC ('Telpico').
By contrast, the restructuring transactions now contemplated under the consensual Fourth Amended Plan include the following key features:
- Equitization of the entirety of PanAm’s allowed secured claim through (i) a new class of equity in Reorganized Tenrgys entitling PanAm to 51% of the voting interests and a right to receive distributions though a Waterfall (as deﬁned in the Plan), under which PanAm’s share of distributions initially would be 90%, but would scale down based on PanAm’s ROI (as deﬁned and described in the Plan) to 50% as more distributions are made; and (ii) 70% of the equity in Telpico;
- Treatment of the Consenting 2013 Loan Lender’s allowed unsecured claim through (i) the payment of $20 million cash on the eﬀective date, (ii) a new $20 million second-lien loan with a ﬁve-year maturity, (iii) a new class of equity in Reorganized Tenrgys equivalent to a 5% economic interest in Reorganized Tenrgys, and (iv) an indirect 5% interest in Telpico;
- Receipt by Existing Tenrgys Equity Interests of (i) a new class of equity in Reorganized Tenrgys entitling Existing Tenrgys Equity holders to 49% of the voting interests and a right to receive distributions though the Waterfall, under which Existing Tenrgys Equity’s share of distributions initially would be 5% but would scale up based on PanAm’s ROI to 45% as more distributions are made; and (ii) an indirect 25% interest in Telpico;
- Payment in full or reinstatement of all other claims;
- Approximately $25 million of exit ﬁnancing funded on the eﬀective date by PanAm and TOG to make the cash payment to the Consenting 2013 Loan Lender and for working-capital needs and to fund the other distributions pursuant to the Plan, plus an additional $5 million in available liquidity under a working-capital facility;
- A total of approximately $45 million in funded debt at emergence; and
- A commitment by PanAm to fund 100% of the initial exploration work program for Telpico’s Colombian assets.
The Fourth Amended Disclosure Statement attached the following exhibits [Docket No. 325]:
- Exhibit A: Plan of Reorganization
- Exhibit B: Corporate Organization Chart
- Exhibit C: Disclosure Statement Order
- Exhibit D: Liquidation Analysis
- Exhibit E: Financial Projections
- Exhibit F: Second Amended RSA
- Exhibit G: FTI Valuation
- Exhibit H: Moyes Valuation
Proposed Key Dates
- Objection Deadline: February 24 , 2021
- Voting Deadline: February 24, 2022
- Confirmation Hearing: March 2, 2022
- Effective Date Deadline: March 21, 2022
Petition Date Perspective
On September 17, 2021, Tenrgys, LLC and 33 affiliated Debtors (“Tenrgys” or the “Debtors,” operators of more than 400 gas wells in Louisiana and Mississippi) filed for Chapter 11 protection with estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn.
Following years of negotiations, including several rounds of changes and demands from PanAm19 Holdings, LLC, an entity created by Nick Caporella's National Beverage Corp to invest in Tenrgys and the Debtors' Colombian assets, it appears the Debtors and prepetition lender FS/EIG Advisor, LLC decided in August 2021 that enough was enough. As a result, the Debtors and EIG negotiated a restructuring support agreement on which a Plan of Reorganization was to be based.
In a declaration in support of the Chapter 11 filing (the “Mills Declaration”), Richard H. Mills Jr., the Debtors’ manager, detailed the events leading to Tenrgys’s Chapter 11 filing. The Mills Declaration provides: “The Debtors have two outstanding funded debt facilities: a secured credit facility with approximately $54 million of principal outstanding, all of which debt is held by PanAm, and an unsecured term loan of approximately $75 million, all of which is held by EIG. Both the secured facility and the unsecured facility have matured and have not been repaid.
For nearly two and a half years, the Debtors have tried to achieve a consensual, out-of-court restructuring with the support of both PanAm and EIG. In particular, over the last several months, both EIG and the Debtors have been prepared to execute several iterations of restructuring transactions; each time, PanAm has ultimately refused to sign a deal on terms that it previously indicated support for, and that reflected continued, material concessions from the Debtors and EIG.
Meanwhile, PanAm recently sent the Company a notice of default and demanded payment of past due interest. Though the demand has been withdrawn, the likelihood of foreclosure or other value destructive action by PanAm remains. Accordingly, shortly before the filing of these Chapter 11 Cases, the Debtors and EIG entered into a restructuring support agreement in which EIG agreed to support the Debtors’ plan of reorganization, which the Debtors intend to present to the Court in short order."
About the Debtors
According to the Debtors: “The Debtors operate an independent oil and natural gas business. Headquartered in Ridgeland, Mississippi, as of September 1, 2021, the Debtors had 11 productive fields and fieldwide units in Mississippi and Louisiana.
Debtor Tellus Energy, LLC (‘Tellus Energy’) and its Debtor subsidiaries Acadiana Mineral Owners, LLC; BAX, LLC; BOE, LLC; Eutaw Ventures, LLC; Jurassic Seismic Company; LASO, LLC; NOMS, LLC; North Cohay, LLC; PCE, LLC; RFND, LLC; RFS, LLC; SNPI, LLC; South Cohay, LLC; STP Ventures, LLC; Tallahala Exploration, LLC; Telpico USA, LLC; TC Energy, LLC; and WCOA, LLC (collectively, the ‘Upstream Debtors’) are involved in the ‘upstream’ segment of the oil-and-gas industry, which means that their business includes the exploration, drilling and extraction of oil, minerals and gaseous hydrocarbons, and other activities associated with the initial stages of oil-and-gas production.”
Corporate Structure Chart
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