Fieldwood Energy Bankruptcy Filing Case Summary & Analysis

RSA

The RSA contemplates the following treatment for holders of claims and interests:

• Administrative, priority tax and priority non-tax claims: Would be paid in full in cash or otherwise receive treatment consistent with section 1129(a)(9) of the Bankruptcy Code.


• DIP claims: Would be (i) paid in full in cash, (ii) if acceptable to the requisite DIP commitment parties, converted into a new loan facility or other securities issued at Lender NewCo on terms acceptable to the debtors and the requisite DIP commitment parties or (iii) receive such other treatment acceptable to the debtors and the requisite DIP commitment parties.


• Other secured claims: Would either receive payment in full in cash or such other treatment as necessary to satisfy section 1124 of the Bankruptcy Code.


• DB receivable claims: Unless previously terminated by Deutsche Bank, holders of claims under the agreement relating to the DB receivables facility (to which certain of the debtors and a nondebtor affiliate are parties) would be (i) replaced on terms to be mutually agreed upon between the debtors, DB and the requisite FLTL lenders and requisite DIP commitment parties, (ii) reinstated or (iii) terminated in accordance with its terms.


• FLFO claims: Treatment remains “to be agreed between the Company and the Prepetition FLFO Lenders and subject to the consent of the Requisite FLTL Lenders and Requisite DIP Commitment Parties.”


• FLTL claims: Treatment remains “to be agreed between the Company, the Requisite DIP Commitment Parties and the Requisite FLTL Lenders.”


• SLTL claims: Treatment remains “to be agreed between the Company, the Requisite DIP Commitment Parties and the Requisite FLTL Lenders.”


• General unsecured claims: Treatment remains “to be agreed between the Company, the Requisite DIP Commitment Parties and the Requisite FLTL Lenders.”


• Intercompany claims: Would be adjusted, settled, reinstated, discharged or eliminated as determined by the debtors with the consent of the requisite DIP commitment parties and the requisite FLTL lenders.


• Intercompany interests: Would be adjusted, settled, reinstated, discharged or eliminated as determined by the debtors with the consent of the requisite DIP commitment parties and the requisite FLTL lenders.


• Existing equity interests: Treatment remains “to be agreed between the Company, the Requisite DIP Commitment Parties and the Requisite FLTL Lenders.”


• Subordinated securities claims: Would not receive or retain any property under the plan on account of such claims. On the effective date, all claims subject to subordination under section 510(b) of the Bankruptcy Code would be deemed canceled.

Other RSA Provisions

The initial board of directors of Lender NewCo or reorganized Fieldwood (if an equitization transaction is consummated) would consist of seven members: the CEO, two members to be appointed by Invesco Senior Secured Management Inc.; one member to be appointed by Franklin Advisers Inc.; one member to be appointed by Symphony Asset Management LLC; and two members to be appointed by the requisite FLTL lenders.

The RSA contemplates debtor release, third-party release and exculpation provisions that are “mutually acceptable to the Debtors, the Requisite DIP Commitment Parties and the Requisite FLTL Lenders,” according to the restructuring term sheet. The specific released and exculpated parties are not disclosed in the term sheet.

The RSA also contemplates a post-emergence management incentive plan for reorganized Fieldwood, with the MIP terms “to be mutually agreed upon between the Debtors, the Requisite DIP Commitment Parties and the Requisite FLTL Lenders.”

Apache Term Sheet

The Apache transaction is a “bad corp” restructuring, which would split the company’s assets into two or more entities, with “legacy Apache properties” (excluding certain retained properties) being owned post confirmation by “Fieldwood I,” the surviving entity of a divisional merger of Fieldwood Energy. Fieldwood I would be responsible for “operating and decommissioning” the properties and would have no other business or operations.

Fieldwood I would be initially capitalized with $50 million (less decommissioning amounts paid by the debtors postpetition) and would be entitled to draw upon an existing decommissioning trust, cash flow from operations on the legacy assets and funds under a standby facility. In the event Fieldwood I is unable to fulfill the decommissioning obligations, Apache would be entitled to draw on the decommissioning trust for the reimbursement of up to $736 million of expenses.

The contemplated Apache transaction would address two-thirds of the debtors’ well plugging and abandonment liabilities, and, according to the term sheet attached to the first day declaration, the restructuring “may include” the following transactions:

• Specified assets: As determined and agreed by the company, the requisite DIP commitment parties and requisite FLTL lenders, the transfer or other disposition of all or substantially all of the specified assets to one or more purchasers or a new entity (Lender NewCo) to be formed at the direction of the requisite DIP commitment parties and the requisite FLTL lenders through (i) a standalone sale or sales pursuant to section 363 of the Bankruptcy Code either via a credit bid or otherwise, (ii) a sale or sales pursuant to a plan either via a credit bid or otherwise, or (ii) an equitization transaction pursuant to a plan.


• Fieldwood I: Through conveyance(s) and/or divisional merger(s), the separation of the assets conveyed by Apache pursuant to the purchase and sale agreement dated as of July 18, 2013, into a limited liability company, business trust or other bankruptcy remote vehicle (referred to as “Fieldwood I”) or as otherwise reasonably agreed by Apache, the company, the requisite DIP commitment parties and the requisite FLTL lenders. The terms of the Apache definitive documents implementing such separation would be consistent with the Apache term sheet and would be subject to the consent rights of the requisite DIP commitment parties and requisite FLTL lenders.


• Non-APA remaining assets: As determined and agreed by the debtors, the requisite DIP commitment parties and requisite FLTL lenders, through conveyance(s) and/or divisional merger(s), the separation or disposition of assets conveyed by non-Apache predecessors-in-title, co-lessees or joint working interest owners other than the specified assets and legacy Apache properties (with such remaining assets referred to as the “Non-APA Remaining Assets”) and the related liabilities into one or more limited liability companies, business trusts or other bankruptcy remote vehicles, or through any conveyance, disposition or other transfer made in accordance with the Bankruptcy Code.


• “Reorganized Fieldwood” means the entity or entities that post-effective-date may directly or indirectly hold all or a portion of the specified assets, Fieldwood I and/or non-APA remaining assets.


• The allocation of debtors’ assets among the specified assets, legacy Apache properties and the non-APA remaining assets and determination of the corporate structure of reorganized Fieldwood and Lender NewCo remains subject to further diligence, the Apache term sheet and the consent rights set forth in the RSA.


• The debtors would pursue the necessary regulatory approvals of the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement with respect to each of the above transactions.

DIP Financing Motion

The debtors seek approval of a multiple-draw senior secured DIP facility not to exceed $100 million. Cantor Fitzgerald Securities is serving as the DIP agent. The DIP facility provides for funding based on the following schedule (subject to certain conditions, including various milestones and compliance with covenants, for each draw): (i) a mandatory initial draw of $10 million following entry of the interim DIP order and upon execution of the DIP credit agreement, (ii) an additional $15 million would be available prior to finalizing the Apache definitive documents (including under the interim DIP order, if applicable), and (iii) subject to entry of the final DIP order, the debtors would be able to draw up to the full amount of the DIP commitments in $20 million increments.

The DIP facility bears interest at L+8.75% (subject to a 1% floor), or ABR plus 7.75%, in each case payable monthly in cash. In the event of default, all overdue amounts under the DIP facility would bear interest at a rate equal to (i) in the case of principal, 2% plus the otherwise applicable rate or (ii) in the case of any obligations other than principal, the then-applicable rate for ABR DIP loans plus 2%.

The DIP facility matures on the earliest of (i) the date falling 12 months after the petition date, (ii) the effective date of any chapter 11 plan of reorganization of the debtors, (iii) the consummation of a sale or other disposition of all or substantially all of the debtors’ assets or specified assets of the debtors under section 363 of the Bankruptcy Code, (iv) the date of acceleration of the DIP loans and termination of the DIP commitments during a default under the DIP facility and (v) 45 days after the petition date, or such later date as agreed to by the required DIP lenders, unless the final DIP order has been entered by the court prior to such date.

The DIP proceeds may be used to pay working capital and general corporate purposes, to fund debt service or fees and expenses under the DIP loans and DIP facility, to pay allowed fees and expenses of retained professionals and to provide for adequate protection.

To secure the DIP financing, the debtors propose to grant liens on substantially all of the assets of the debtors’ assets except for causes of action under chapter 5 of the Bankruptcy Code and the Apache collateral. Subject to the carve-out, the DIP obligations are also entitled to superpriority administrative expenses claim status; shall be secured by a perfected first priority security interest and lien on the DIP collateral that would be pari passu with valid and perfected liens in favor of hedge counterparties related to secured hedging transactions entered into on a postpetition basis; with respect to existing permitted liens of the prepetition secured parties and Apache secured parties or valid unavoidable liens held by third parties, the debtors would grant junior perfected security interests and liens on the DIP collateral. The DIP obligations would be secured by a perfected priming lien on DIP collateral to the extent such collateral is subject to existing liens of the prepetition secured parties.

The DIP facility contains certain fees including: (i) a 3% upfront fee, (i) a 3% annual unused line fee and (iii) a 4% backstop fee. The DIP also contains various milestones related to the sale process for the deepwater assets and confirmation of a chapter 11 plan.

The DIP motion explains that the debtors received two proposals for DIP financing: a proposal from the prepetition FLFO lenders and a proposal from the prepetition FLTL lenders. The supporting declaration of John-Paul Hanson of Houlihan Lokey states that the DIP facility proposed by the FLTL lenders was the best financing alternative available because it avoids the delay and expenses resulting from protracted litigation regarding the terms of any priming lien and adequate protection, does not require a rollup of any prepetition debt, was negotiated in the context of a larger restructuring transaction and was ultimately agreed to as part of the RSA, and it provides the debtors with the necessary liquidity to fund their chapter 11 cases. The DIP motion notes that even though the FLFO proposal offered a lower interest rate and fees, the FLFO proposal carried with it a requirement for a substantial rollup and “significant execution risk” since it would likely require the debtors to seek approval of a DIP facility that would prime the FLTL lenders’ prepetition liens on a nonconsensual basis.

The company proposes as adequate protection to its prepetition FLFO secured parties and the prepetition FLTL secured parties: superpriority claims and liens, the payment of postpetition interest on a current basis (at the non-default rate, and solely for the prepetition FLFO secured parties) and the payment of reasonable fees and expenses incurred by the prepetition FLFO secured parties and the prepetition FLTL secured parties both before and after the petition date.

In addition, the debtors propose, subject to the entry of a final order, a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b).

The carve-out for professional fees is $6 million.

The proposed budget for the use of the DIP facility is HERE.

The DIP term sheet includes several milestones for the debtors’ restructuring as reflected in the RSA, including:

• No later than 15 days after the petition date: occurrence of the “DIP Closing Date” (as defined in the RSA);


• No later than 75 days after the petition date: (i) the completion of definitive documentation with respect to the transactions contemplated by the Apache term sheet; (ii) the debtors, at the election of the requisite DIP commitment parties and the requisite FLTL lenders, will have proposed and filed a plan of reorganization, a disclosure statement and a motion to approve the disclosure statement or have filed a bidding procedures motion.


• No later than 100 days after the petition date: in the event that a bidding procedures motion is filed, entry of the bidding procedures order;


• No later than 150 days after the petition date: approval of the disclosure statement;


• No later than 195 days after the petition date: confirmation of the debtors’ chapter 11 plan; and


• No later than 210 days after the petition date: occurrence of the plan effective date.

Other Motions

The debtors also filed various standard first day motions, including the following:

• Motion for joint administration
  
  
  
  • The cases will be jointly administered under case No. 20-33948 (MI).
  
  
  
  


• Motion to establish trading procedures
  
  
  
  • The debtors seek to establish trading procedures for its common stock, to be able to object to and prevent transfers if necessary to preserve net operating losses. The debtors estimate that as of the petition date, they have federal NOLs “in excess of $170 million” and consolidated federal business interest expense carryforwards “in excess of $465 million” as well as certain other favorable tax attributes.
  
  
  
  


• Motion to pay employee wages and benefits
  
  
  
  • The debtors estimate that they owe approximately $9.7 million in prepetition employee obligations and other compensation obligations as of the petition date.
  
  
  
  


• Motion to use cash management system
  
  
  
  • The debtors have bank accounts with Capital One, U.S. Bank and JPMorgan Chase.
  
  
  
  


• Motion to pay prepetition interest owner obligations, joint interest billings, E&P operating expenses and 503(b)(9) claims
  
  
  
  • The debtors estimate that they owe the following prepetition obligation amounts as of the petition date.
  
  
  
  

• Motion to pay taxes and fees
  
  
  
  • The debtors estimate that approximately $2.7 million in prepetition taxes will become due in the ordinary course after the petition date.
  
  
  
  


• Motion to maintain insurance and surety bond programs


• Motion to provide utilities with adequate assurance


• Motion to vile consolidated creditor matrix and consolidated list of 30 largest unsecured creditors


• Motion to extend time to file schedules and statements


• Application to appoint Prime Clerk as claims, noticing and solicitation agent / order