Vista Proppants and Logistics, LLC – After Last Minute Scramble, Court Confirms Fourth Amended Joint Chapter 11 Plan of Reorganization

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October 28, 2020 – The Court hearing the Vista Proppants and Logistics cases issued an order confirming the Debtors’ Fourth Amended Joint Chapter 11 Plan of Reorganization [Docket No. 717]. 

The Plan as approved includes several modifications from the version filed on October 26th; these modifications to settle outstanding objections with individual stakeholders and to add further language as to indemnification provisions protecting the Debtors' directors and officers that briefly looked set to derail the Plan confirmation hearings. The final Plan, with modifications, is attached to the confirmation order [Docket No. 717] with the "findings of fact" in support of Plan confirmation filed separately at Docket No. 718. 

The Debtors filed a blackline of their proposed confirmation order at Docket No. 690 which notes the last minute individual stakeholder settlements and the inclusion of the indemnification language sought by counsel to the directors and officers which was as follows: "The dissolution of Vista HoldCo in accordance with the Plan shall notterminate or waive any rights or defenses any member, director or officer may have under theVista HoldCo limited liability agreement in response to any Litigation Trust Cause of Actionwhich may be asserted against such member, director or officer."

Also attached to the order (Exhibit B), and related to the concern over litigation exposure now addresses, is a term sheet summarizing key terms of a comprehensive September 2020 settlement (the “Settlement”) amongst the Debtors, their Official Committee of Unsecured Creditors (the “Creditors’ Committee”), the term loan agent and the term loan lenders; this settlement providing general unsecured creditors with a $2.0mn cash settlement and establishing (and funding with part of the $2.0mn) a litigation trust.

On June 9, 2020, Vista Proppants and Logistics, LLC and six affiliated Debtors (“Vista” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Northern District of Texas, lead case number 20-42002. At filing, the Debtors, a leading in-basin provider of frac sand solutions, noted estimated assets between $100.0mn and $500.0mn and estimated liabilities between $100.0mn and $500.0mn. The Whitley Declaration (defined below) added: "As of April 20, 2020, Vista’s unaudited balance sheets reflected total assets of approximately $400 million and total liabilities of approximately $500 million."

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):

The Plan provides for the resolution of Claims against and Interests in the Debtors and implements a distribution scheme pursuant to the Bankruptcy Code. Distributions under the Plan shall be funded with: (1) Cash on hand; (2) ABL Priority Collateral; (3) the MAALT Priority Collateral; (4) the issuance and distribution of the New Equity Interests;  (5) the Exit Facility; (6) the GUC Cash Pool (if any); and (7) interests in the Litigation Trust, as applicable.

  • Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $8.9mn and the estimated recovery is 100%. Includes scheduled Other Secured Claims against Lonestar Ltd. of approximately $5,684,593 and scheduled Other Secured Claims against MAALT in the amount of approximately $4,000, plus approximately $3,000,407 in Other Secured Claims against Lonestar Ltd. related to Hogg Ranch reclamation secured by a certificate of deposit and approximately $205,000 in Other Secured Claims against Bulk related to workers’ compensation secured by a certificate of deposit.
  • Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $0 and the estimated recovery is 100%.
  • Class 3 (“Term Loan Secured Claims”) is impaired and entitled to vote on the Plan. The estimated Recovery is 100% and aggregate amount of claims is $369,300,998.02 minus the amount of the Term Loan Deficiency Claim plus (i) accrued but unpaid interest, including default interest, under the Term Loan Documents as of the Petition Date, and (ii) unpaid reasonable and documented fees, expenses, costs, and other charges incurred or accrued by the Term Loan Agent in connection with any and all aspects of the Chapter 11 Cases as of the Effective Date, subject to the provisions of the DIP Financing Order and this Plan. Each holder shall receive the following:
  1. Its Pro Rata share of 100% of the New Parent Units in the New Parent Company, which New Parent Company shall receive 100% of the equity interests of VPROP (which shall continue to hold the equity interests of its direct and indirect subsidiaries);
  2. Its Pro Rata share of Tranche C Exit Facility Notes equal to $50,000,000; and
  3. The right to participate in Tranche A of the Exit Facility up to its Pro Rata share of $30,000,000 of new money in exchange for an equal amount of Tranche A Exit Facility Notes.
  • Class 4 (“Plains Capital ABL Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%. Each holder of a Plains Capital ABL Secured Claim shall receive the ABL Priority Collateral securing such Plains Capital ABL Secured Claims, subject in all respects to the claims asserted against ABL Lender in the Standing Motion, to the extent that standing is granted by the Court (including after successful appeal). The allowance and treatment under the Plan of the Plains Capital ABL Secured Claims shall be without prejudice to the Standing Motion Claims against the ABL Lender, which shall be preserved under the Plan for prosecution by the Litigation Trustee, as contemplated in Article IV.P of the Plan, and shall not be subject to any preclusion doctrine, including res judicata, collateral estoppel, issue preclusion, claim preclusion, waiver, judicial estoppel or equitable estoppel, based on the confirmation of the Plan, the effectiveness of the Plan or the allowance and treatment of the Plains Capital ABL Secured Claims under the Plan
  • Class 5 (“MAALT Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%. Each holder of a MAALT Secured Claim shall receive, at the option of the applicable Debtor, with the prior written consent of the Required Consenting Lenders, the following:

(i)The collateral securing its MAALT Secured Claim

(ii) Reinstatement of its MAALT Secured Claim; or

(iii) Such other treatment rendering its MAALT Secured Claim Unimpaired in accordance with section 1124 of the Bankruptcy Code

  • Class 6 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The Plan provides: (i) Each holder of a General Unsecured Claim that is not a Term Loan Lender Class 6 Creditor shall receive from the Disbursing Agent its Pro Rata share of the GUC Cash Settlement Distribution on or before the date that is 180 days after the Effective Date, which may be extended for cause upon motion by the Litigation Trustee, and (ii) each holder of a General Unsecured Claim (including Term Loan Lender Class 6 Creditors holding Term Loan Deficiency Claims) shall receive from the Disbursing Agent its Pro Rata share of the distributions in respect of its Litigation Trust Interests, subject to the sharing mechanism in accordance with Article VI.F.2 of the Plan.

In the event that the Litigation Trustee achieves any recoveries from the Litigation Trust Causes of Action, then holders of Litigation Trust Interests that are not Term Loan Lender Class 6 Creditors shall receive the first $4,000,000 recovered by the Litigation Trust after payment of Litigation Trust expenses, including repayment of the Litigation Trust Loan. Thereafter, any recoveries achieved by the Litigation Trustee shall be split 60/40, respectively, between (i) holders of Litigation Trust Interests that are Non-Term Loan Lender Class 6 Creditors and (ii) holders of Litigation Trust Interests that are Term Loan Class 6 Creditors. To the extent that the Litigation Trustee achieves a Plains Capital Recovery, Term Loan Class 6 Creditors shall not share in any such recovery nor shall the Plains Capital Recovery be utilized to repay the Litigation Trust Loan.

  • Class 7 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The aggregate amount of claims is $263.9mn.
  • Class 8 (“Interests in Debtors other than Vista HoldCo”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan.
  • Class 9 (“Interests in Vista HoldCo”) is impaired, deemed to reject and not entitled to vote on the Plan.

Voting Results

On October 23, 2020, the Debtors' claims agent notified the Court of the Plan voting results [Docket No. 672], which were as follows:

  • Class 3 (“Term Loan Secured Claims”): 13 claim holders, representing $ 369,512,061.95 (100%) in amount and 100% in number, voted in favor of the Plan.
  • Class 6A (“General Unsecured – Vista Proppants and Logistics, LLC”): 26 claim holders, representing $220,370,645.67 (97.09%) in amount and 56.52% in number, voted in favor of the Plan. 20 claims holders, representing $6,616,334.90 (2.91%) in amount and 43.48% in number, rejected the Plan.
  • Class 6B (“General Unsecured – VPROP Operating, LLC”): 13 claim holders, representing $219,512,061.95 (100%) in amount and 100% in number, voted in favor of the Plan.
  • Class 6C (“General Unsecured – Lonestar Prospects Management, L.L.C.”): 15 claim holders, representing $219,522,066.94 (100%) in amount and 100% in number, voted in favor of the Plan.
  • Class 6D (“General Unsecured – MAALT Specialized Bulk, LLC”): 21 claim holders, representing $219,614,671.42 (99.46%) in amount and 80.77% in number, voted in favor of the Plan. 5 claims holders, representing $1,183,851.98 (0.54%) in amount and 19.23% in number, rejected the Plan.
  • Class 6E (“General Unsecured – Lonestar Prospects, Ltd.”): 51 claim holders, representing $254,936,646.00 (99.17%) in amount and 76.12% in number, voted in favor of the Plan. 16 claims holders, representing $2,130,957.72 (0.83%) in amount and 23.88% in number, rejected the Plan.
  • Class 6F (“General Unsecured – Denetz Logistics, LLC”): 13 claim holders, representing $219,512,061.95 (100%) in amount and 100% in number, voted in favor of the Plan.
  • Class 6G (“General Unsecured – MAALT, LP”): 27 claim holders, representing $226,090,820.92 (97.85%) in amount and 79.41% in number, voted in favor of the Plan. 7 claims holders, representing $4,966,092.86 (2.15%) in amount and 20.59% in number, rejected the Plan.

Key Documents

Amended Plan Supplement

The Debtors filed Plan Supplements at Docket Nos. 549, 612, 671 and 687 which attached the following documents [Docket No. 687], and attached:

Docket No. 549

  • Exhibit 1: Updated Governance Documents [see Docket No. 612];
  • Exhibit 2: Identities of the officers of the Reorganized Debtors [see Docket No. 612] ;
  • Exhibit 3: Identities and affiliations of the members of the New Parent Board [see Docket No. 612] ;
  • Exhibit 4: Exit Facility Documents [see Docket No. 612] ;
  • Exhibit 5: Schedule of Assumed Contracts and Leases [see Docket No. 671] ; 
  • Exhibit 6 – Schedule of Retained Causes of Action; 
  • Exhibit 7 – Schedule of Litigation Trust Causes of Action; 
  • Exhibit 8 – Litigation Trust Agreement; 
  • Exhibit 9 – Litigation Trust Loan Documents; and 
  • Exhibit 10 – Identity of Litigation Trustee
  • Exhibit 1: Identities of Litigation Trust Oversight Committee and the Litigation Trustee

 Docket No. 612

  • Exhibit 1: Updated Governance Documents
  • Exhibit 2: Identities of the officers of the Reorganized Debtors
  • Exhibit 3: Identities and affiliations of the members of the New Parent Board
  • Exhibit 4: Exit Facility Documents 
  • Exhibit 5: Schedule of Assumed Contracts and Leases
  • Exhibit 6: Schedule of Retained Causes of Action
  • Exhibit 7: Schedule of Litigation Trust Causes of Action
  • Exhibit 8: Litigation Trust Agreement 
  • Exhibit 9: Litigation Trust Loan Documents
  • Exhibit 10: Identity of Litigation Trustee [see Docket No. 687]

Docket No. 671

  • Exhibit 1: Schedule of Assumed Contracts and Leases
  • Exhibit 2: Identities of the officers of the Reorganized Debtors; and
  • Exhibit 3: Identities of the directors of the Reorganized Debtor 

Docket No. 687

  • Exhibit 1: Identities of Litigation Trust Oversight Committee and the Litigation Trustee 

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Whitley Declaration”), Kristin Whitley, the Debtors’ Chief Financial Officer, detailed the events leading to the Debtors' Chapter 11 filing. The Whitley Declaration states: "The Debtors’ business and financial performance heavily depends on sales generated by a limited customer base—i.e. exploration and production companies and oilfield service providers engaged in drilling and well services. The Debtors’ financial performance has been negatively affected by an ongoing slump in natural gas and oil commodity prices, which adversely affected the fluctuating demand for frac sand. The Debtors’ financial performance has also been adversely impacted by an industry shift towards construction of multiple in-basin sand mines and the use of in-basin sand, which did not materially exist prior to 2017. 

Vista’s financial difficulties are compounded by the COVID-19 pandemic. The effects of this pandemic have taken a significant toll on energy markets and the nation’s financial system. The COVID-19 pandemic continues to spread, further affecting exploration and production activity and creating operations challenges due to travel restrictions, social distancing guidelines, business restrictions, local 'shelter in place' orders, and other logistical hurdles. 

The Debtors have also faced internal obstacles and company-specific business challenges. Internal logistics obstacles, geographic shifts in demand, and the Debtors’ overall capital structure have resulted in decreased productivity and revenues. The Debtors continue to experience sales declines, resulting in further liquidity pressures. The Debtors’ revenue and profitability remain insufficient to support its debt service, working capital, and capital expenditures requirements. 

To address the financial challenges and the COVID-19 related damage suffered by the Debtors and preserve the going-concern value of their business, the Debtors seek relief from this Court to implement a restructuring of the business in a manner that will be most beneficial to its various creditors."

Prepetition Indebtedness

  • Senior Secured Credit Agreement: The Debtors (eg. Vista OpCo and VPROP) are party to a November 2017 credit agreement (the “Term Loan Agreement”) with Ares Capital Corporation, as administrative agent (“Ares” or the “Term Loan Agent”). The Term Loan Agreement provides for a senior secured term loan facility (the “Term Loan Credit Facility”). As of the Petition date, approximately $369,300,998 in principal and prepetition interest is outstanding under the Term Loan Credit Facility (the “Term Loans”).
  • ABL Facility: Lonestar Ltd., as borrower, Lonestar Prospects Holding Company, L.L.C., Gary B. Humphreys, Martin W. Robertson, and the other guarantors party thereto, as guarantors, and PlainsCapital Bank (“PlainsCapital” or the “ABL Lender”) are parties to January 2018 loan agreement (the “ABL Agreement”) which provides for a senior secured credit facility (the “ABL Facility”) in an amount of up to $21,959,690. As of the Petition Date, approximately $15,984,430 in principal and interest is outstanding under the ABL Facility.
  • MAALT Facility:  MAALT, and non-debtor GHMR Operations, L.L.C., as borrowers, Denetz, Gary B. Humphreys, Martin W. Robertson, and certain trust guarantors, as guarantors, and PlainsCapital, as lender, are parties to a June 2014 loan agreement (the “MAALT Credit Agreement,” and the facility thereunder, the “MAALT Facility”). The MAALT Credit Agreement provided for three term loans: the first term loan in the amount of $13,826,834, the second term loan in the amount of $3,850,497, and the third term loan in the amount of $1,797,500, as well as a senior secured revolving credit facility in the amount of up to $2 million, subject to certain terms and conditions (collectively, the “MAALT Facility”). As of the Petition date, approximately $3,923,450 in principal and prepetition interest is outstanding under the MAALT Facility (the “MAALT Facility Obligations”).

Liquidation Analysis (see Exhibit 3 to Disclosure Statement [Docket No. 402] for notes)

About the Debtors

According to the Debtors: “Vista Proppants and Logistics (‘VISTA’) is a leading pure-play, in-basin provider of frac sand solutions in prolific producing regions in Texas and Oklahoma including the Permian Basin, Eagle Ford Shale and SCOOP/STACK. Headquartered in Fort Worth, Texas, VISTA offers leading E&P and oilfield service companies high-quality, fine grade sand with the cost advantages of a regional provider. Through our vertically integrated logistics network of transload terminals and fleet of ‘last mile’ transport vehicles, VISTA’s customers further benefit from our mine-to-wellhead frac sand supply chain solutions and assured security of supply.”

The Whitley Declaration adds: “Vista Proppants and Logistics, LLC is a privately owned limited liability company formed under the laws of the State of Delaware and headquartered in Fort Worth, Texas.

Vista’s principal business is producing mine-to-wellhead high-quality, fine-grade frac sand for oil and gas well completion in producing regions in Texas and Oklahoma, including the Permian Basin, Eagle Ford Shale, and the Southern Central Oklahoma Oil Province and the Sooner Trend (oil field) Anadarko (basin), Canadian and Kingfisher (counties) (the ‘COOP/STACK’). Vista currently employs approximately fifty-six individuals. Through its mining operations, Vista is capable of producing high-quality, fine-grade, 40/70-mesh, 100-mesh, and 200-mesh sand, which is marketed as ‘Texas Premium White’ sand. 

The Debtors began business in 2004 as a trucking entity and expanded over time into a vertically integrated frac sand supplier. The Debtors commenced transloading operations in 2006 and began mining in 2011. In 2012, the Debtors’ added rail service a few miles away from the Cresson Mine for direct shipment of sand in-basin.”

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