Tue 11/17/2020 10:31 AM
Share this article:
An ad hoc group of holders of Basic Energy Services’ $300 million 10.75% secured notes due 2023 has organized with Davis Polk as legal advisor and Ducera Partners as financial advisor amid tight liquidity, according to sources. The group is evaluating its options regarding a proposed exchange offer the oil and gas production services provider announced on Nov. 5, the sources said.

Continue reading for our Americas Middle Market team's analysis of Basic Energy as well as their liquidity pressure and Request a Trial for access to the linked documents and analysis plus our coverage of thousands of other stressed/distressed debt situations.

The company reported $30.5 million of liquidity as of Sept. 30, including $14.2 million of cash, restricted cash and cash equivalents and $16.3 million of availability under its $75 million ABL revolver due October 2023.

The 2023 notes last traded in size on Sept. 9 at 21, according to TRACE.

Under the terms of the proposed transaction, Basic Energy is offering to exchange the 2023 notes at 40 for up to $80 million of 11% secured notes due 2025 by the early deadline of Nov. 19 at 5 p.m. ET. The offer is conditioned on a minimum tender of two-thirds of the 2023 notes. Noteholders tendering by the early deadline will have the right to purchase their pro rata share of $20 million of 9.75% superpriority notes due 2025. The exchange offer will expire Dec. 4 at 11:59 p.m. ET.

In conjunction with the exchange offer, the company is soliciting consents to amend the indenture governing the existing notes and the related security documents to, among other things, eliminate substantially all of the covenants, restrictive provisions and events of default and to release the existing subsidiary guarantees of the existing notes. Consents of holders representing at least two-thirds of the aggregate principal amount of the existing notes outstanding is required.

As part of the proposal, Ascribe Capital has provided a commitment to purchase $15 million of the new superpriority notes in exchange for a 1.25% commitment cash premium. Noteholders that participate in the notes rights offering would also receive the same commitment cash premium of 1.25%. The commitment fee to any noteholder is contingent on the closing of the exchange offer.

Ascribe holds a $15 million secured promissory note due October 2023 issued to fund the company’s acquisition of rig servicing provider C&J Well Services Inc. in March, as well as a $15 million second lien delayed draw promissory note issued in October that was drawn by $7.5 million as of Oct. 15, according to the 10-Q.

Ascribe owns about 85% of Basic Energy equity following the exchange of certain of its holdings of the 2023 notes for preferred stock as part of the C&J acquisition, according to the third-quarter 10-Q.

Basic Energy warned in its third quarter 10-Q that due to the uncertainty of future oil and natural gas prices and the effects the outbreak of Covid-19 pandemic will have on its future results of operations, operating cash flows and financial condition, there is substantial doubt as to the ability of the company to continue as a going concern.

Representatives for Basic Energy and Ducera Partners declined to comment. Davis Polk did not immediately respond to requests for comment.

--Andrew Berlin, Harvard Zhang
Share this article:
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2024 Reorg Research, Inc. All rights reserved.
Thank you for signing up
for Reorg on the Record!