Vista Proppants and Logistics
CASE SUMMARY: Vista Proppants Senior Lenders ‘Fully-Supportive’ of Chapter 11 Filing; Ares, Other Term Lenders to Provide $11M in DIP Financing
Thu 06/11/2020 09:10 AM
Relevant Documents:
Voluntary Petition
Press Release
Whitley Declaration
Barton Declaration
DIP Financing Motion
First Day Hearing Agenda
The DIP commitments are HERE, including various Ares entities, MSD Credit Opportunity Fund, L.P., SOF Investments II, L.P. and AG Energy Funding, LLC.
After months of efforts which included negotiating default/forbearance agreements with Ares, the debtors determined that Vista lacked liquidity to operate during the remainder of 2020 and required additional sources of financing. Ares Capital Corp. CEO Kipp deVeer said on the business development company’s fourth-quarter earnings call in February that it was engaged day to day with Vista Proppants’ management team on a restructuring.
“Left with no other alternative,” the company began contemplating a chapter 11 reorganization process and engaged in restructuring discussions with the prepetition creditors. To combat the “near-cessation” of revenue, the debtors furloughed the majority of their employees and shut down operations in a manner to allow recommencement of operations in the future. The bankruptcy “will provide the Debtors with the best opportunity to preserve the business as a going concern, make necessary changes to the Debtors’ business plan, eliminate costly contracts and lease obligations, and thereby preserve value for the Debtors’ estates,” the company’s Chief Financial Officer Kristin Whitley, says in the first day declaration.
The first day hearing is scheduled for today, Thursday, June 11, at 2:30 p.m. ET. The case docket is available on Reorg HERE.
As of April 20, Vista’s unaudited balance sheets reflected total assets of approximately $400 million and total liabilities of approximately $500 million. The company’s prepetition capital structure includes:
Pursuant to an intercreditor agreement, the “Term Loan Liens have first priority with respect to all of the Debtors’ assets other than certain accounts receivable, finished sand inventory, general intangibles, and the proceeds of the foregoing.”
The company attributes the bankruptcy filing to the ongoing slump in natural gas and oil commodity prices, which have hindered the demand for frac sand, as well as industry shift toward construction of multiple in-basin sand mines and the use of in-basin sand, which the debtors note did not materially exist prior to 2017. The pandemic has exacerbated these troubles, with the debtors stressing that Covid-19 has taken a “significant toll on energy markets and the nation’s financial system.” The 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 first day declaration follows.
Frac sand producers have been challenged by the slowdown in the operating environment. Vista peer Hi-Crush has reported a sharp decline in performance, and Emerge Energy Services filed for chapter 11 last year.
Vista has also faced company-specific challenges, including internal logistics obstacles, geographic shifts in demand and the debtors’ overall capital structure, which together have resulted in deteriorating revenue. “The Debtors continue to experience sales declines, resulting in further liquidity pressures,” the company says, with revenue and profitability remaining insufficient to support its debt service, working capital and capital expenditures requirements.
The debtors are represented by Haynes and Boone in Fort Worth. KCC is the claims agent. Gary Barton of Alvarez & Marsal is the chief restructuring officer. The case number is 20-42002. The case has been assigned to Judge Edward L. Morris.
Background
Vista Proppants and Logistics, which began business in 2004 as a trucking entity before expanding into vertically integrated frac sand production, is a privately-owned supplier of wellhead frac sand for oil and gas well completion activity in the Permian Basin, Eagle Ford Shale, Southern Central Oklahoma Oil Province and the Sooner Trend Anadarko Basins of Texas and Oklahoma. Through its mining operations, the company produces high-quality, fine-grade, 40/70-mesh, 100-mesh and 200-mesh frac sand, which is marketed as “Texas Premium White” sand. The debtors commenced transloading operations in 2006 and began mining in 2011. In 2012, Vista added rail service a few miles away from the Cresson Mine in Granbury, Texas, for direct shipment of sand in-basin. The debtors have 56 employees.
The debtors terminated their trucking operations and say that they have substantially reduced transloading operations and temporarily shut down their mining operations, other than the minimal operations necessary to preserve equipment and infrastructure.
Vista attempted to raise up to $100 million in an initial public offering at the beginning of 2018.
(Click HERE to enlarge)
The debtors' largest unsecured creditors are listed below:
The case representatives are as follows:
DIP Financing Motion
The debtors request DIP financing in the form of a revolving facility with Ares as DIP agent, in an amount up to $11 million ($3.5 million on an interim basis).
The DIP financing bears interest at LIBOR plus 9.5%, with 2% added for the default rate, and matures on the earliest of 180 days from the petition date, 30 days after entry of the interim order if the final order has yet to be entered, the effective date of a plan of reorganization or liquidation, consummation of a sale of all or substantially all of the debtors’ assets, dismissal or conversion of the cases, appointment of a trustee or receiver, filing of a plan that is not an “Acceptable Plan” without the DIP lenders’ prior written consent, termination of the DIP commitments or acceleration of the DIP loans.
An “Acceptable Plan” is defined as a plan and DS “acceptable to the DIP Lenders in their sole and absolute discretion as confirmed in writing by the DIP Agent.”
The proposed DIP liens would not prime the following pre-existing first priority, senior liens as of the petition date: “(i) the ABL Lender in the ABL Priority Collateral (including, without limitation, any and all Cash Collateral constituting ABL Priority Collateral); or (ii) the MAALT Lender in the MAALT Collateral (including, without limitation, any and all Cash Collateral constituting MAALT Collateral).” The debtors do propose DIP liens on avoidance actions and their proceeds subject to the final order. The DIP obligations would also constitute superpriority administrative expense claims “subject to (i) the Carve-Out; and (ii) the ABL Lender’s and MAALT Lender’s respective credit bid, lien rights and repayment rights in the sale or other disposition of any ABL Priority Collateral or MAALT Collateral.”
The prepetition term loan lenders have agreed to the use of cash collateral, according to the motion, and the debtors are not seeking authority by the motion to use cash collateral constituting “ABL Priority Collateral of PlainsCapital or MAALT Collateral of MAALT.”
The DIP includes adequate protection (to the extent of a diminution in value of collateral) for the term loans “in consideration for being primed by the DIP Lenders’ claims and liens.” The term loans would receive replacement liens and superpriority administrative expense claims with priority “immediately junior to the DIP Liens, subject to, junior and subordinate to the priority of the ABL Lender’s liens in the ABL Priority Collateral, the MAALT Lender’s liens in the MAALT Collateral, and subject to the Carve-Out.” The term loans would also receive adequate protection payments of professional fees and expenses.
The debtors also propose to provide financial reporting to the DIP lenders, ABL lender and the MAALT lender.
In addition, subject to the final order, the debtors propose 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 carveout for professional fees of the debtors is $500,000 and for any official unsecured creditors’ committee, $100,000.
The proposed budget for the use of the DIP facility is HERE.
The DIP financing is subject to the following milestones:
The lien investigation deadline is 30 days after appointment for an official unsecured creditors’ committee, and for other parties in interest, 45 days after the petition date. The UCC investigation budget is $25,000.
Lease/Contract Rejection Motions
The debtors have filed nine motions to reject a total of 577 certain executory contracts and unexpired leases, including, among others, railcar leases, management services agreements, employment agreements, equipment leases, sales agreements, rental agreements, user agreements and settlement agreements. The First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth and Ninth are linked here.
Other Motions
The debtors also filed various standard first day motions, including the following:
Voluntary Petition
Press Release
Whitley Declaration
Barton Declaration
DIP Financing Motion
First Day Hearing Agenda
| Summary |
| Vista Proppants and Logistics provides frac sand services for well completions |
| Requests $11 million in DIP financing from Ares Capital Corporation and other existing term loan lenders |
| Senior lenders are expected to sponsor plan of reorganization |
Vista Proppants and Logistics, LLC, a Fort Worth, Texas-based provider of frac sand services for well completions, filed for chapter 11 protection on Tuesday in the Bankruptcy Court for the Northern District of Texas, seeking to restructure. Ares Capital Corporation and other existing term loan lenders have committed to provide a non-amortizing senior secured delayed draw term loan facility up to $11 million. “The Company’s senior lenders are fully-supportive of the bankruptcy filings and expect to sponsor a plan of reorganization with Vista to facilitate a prompt exit from Chapter 11,” according to the declaration of the debtors’ Chief Restructuring Officer, Gary Barton.The DIP commitments are HERE, including various Ares entities, MSD Credit Opportunity Fund, L.P., SOF Investments II, L.P. and AG Energy Funding, LLC.
After months of efforts which included negotiating default/forbearance agreements with Ares, the debtors determined that Vista lacked liquidity to operate during the remainder of 2020 and required additional sources of financing. Ares Capital Corp. CEO Kipp deVeer said on the business development company’s fourth-quarter earnings call in February that it was engaged day to day with Vista Proppants’ management team on a restructuring.
“Left with no other alternative,” the company began contemplating a chapter 11 reorganization process and engaged in restructuring discussions with the prepetition creditors. To combat the “near-cessation” of revenue, the debtors furloughed the majority of their employees and shut down operations in a manner to allow recommencement of operations in the future. The bankruptcy “will provide the Debtors with the best opportunity to preserve the business as a going concern, make necessary changes to the Debtors’ business plan, eliminate costly contracts and lease obligations, and thereby preserve value for the Debtors’ estates,” the company’s Chief Financial Officer Kristin Whitley, says in the first day declaration.
The first day hearing is scheduled for today, Thursday, June 11, at 2:30 p.m. ET. The case docket is available on Reorg HERE.
As of April 20, Vista’s unaudited balance sheets reflected total assets of approximately $400 million and total liabilities of approximately $500 million. The company’s prepetition capital structure includes:
- Secured debt:
- Ares senior secured term loans: $370.2 million
- PlainsCapital Bank ABL: $16 million
- MAALT Facility debt: $3.9 million
- Ares senior secured term loans: $370.2 million
- Property taxes: $2.2 million related to 2019 tax year and $1.3 million for the prepetition portion of 2020 tax year
- Franchise/income taxes: $207,000
- Equity: A full list of equityholders is HERE. Holders of more than 10% of the debtor’s equity are as follows:
Pursuant to an intercreditor agreement, the “Term Loan Liens have first priority with respect to all of the Debtors’ assets other than certain accounts receivable, finished sand inventory, general intangibles, and the proceeds of the foregoing.”
The company attributes the bankruptcy filing to the ongoing slump in natural gas and oil commodity prices, which have hindered the demand for frac sand, as well as industry shift toward construction of multiple in-basin sand mines and the use of in-basin sand, which the debtors note did not materially exist prior to 2017. The pandemic has exacerbated these troubles, with the debtors stressing that Covid-19 has taken a “significant toll on energy markets and the nation’s financial system.” The 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 first day declaration follows.
Frac sand producers have been challenged by the slowdown in the operating environment. Vista peer Hi-Crush has reported a sharp decline in performance, and Emerge Energy Services filed for chapter 11 last year.
Vista has also faced company-specific challenges, including internal logistics obstacles, geographic shifts in demand and the debtors’ overall capital structure, which together have resulted in deteriorating revenue. “The Debtors continue to experience sales declines, resulting in further liquidity pressures,” the company says, with revenue and profitability remaining insufficient to support its debt service, working capital and capital expenditures requirements.
The debtors are represented by Haynes and Boone in Fort Worth. KCC is the claims agent. Gary Barton of Alvarez & Marsal is the chief restructuring officer. The case number is 20-42002. The case has been assigned to Judge Edward L. Morris.
Background
Vista Proppants and Logistics, which began business in 2004 as a trucking entity before expanding into vertically integrated frac sand production, is a privately-owned supplier of wellhead frac sand for oil and gas well completion activity in the Permian Basin, Eagle Ford Shale, Southern Central Oklahoma Oil Province and the Sooner Trend Anadarko Basins of Texas and Oklahoma. Through its mining operations, the company produces high-quality, fine-grade, 40/70-mesh, 100-mesh and 200-mesh frac sand, which is marketed as “Texas Premium White” sand. The debtors commenced transloading operations in 2006 and began mining in 2011. In 2012, Vista added rail service a few miles away from the Cresson Mine in Granbury, Texas, for direct shipment of sand in-basin. The debtors have 56 employees.
The debtors terminated their trucking operations and say that they have substantially reduced transloading operations and temporarily shut down their mining operations, other than the minimal operations necessary to preserve equipment and infrastructure.
Vista attempted to raise up to $100 million in an initial public offering at the beginning of 2018.
(Click HERE to enlarge)
The debtors' largest unsecured creditors are listed below:
| 10 Largest Unsecured Creditors | |||
| Creditor | Location | Claim Type | Claim Amount |
|---|---|---|---|
| Penske Truck Leasing Co., L.P | Reading, Pa. | Trade | $ 6,131,484 |
| Trinity Industries Leasing Co. | Dallas | Trade | 1,709,195 |
| Sand Hill Land & Cattle LLC | Granbury, Texas | Royalty | 1,527,674 |
| Caterpillar Financial Services | Nashville, Tenn. | Trade | 1,369,504 |
| RJ Sikes | Waxahachie, Texas | Tax Sharing Agreement |
1,333,333 |
| CCC Group Inc. | San Antonio | Settlement Agreement |
1,234,687 |
| SandBox Logistics, LLC | Katy, Texas | Trade | 774,602 |
| Twin Eagle Sand Logistics, LLC | Houston | Trade | 705,559 |
| MP Systems Company | Lenexa, Kan. | Trade | 668,740 |
| The Andersons Railcar Leasing | Maumee, Ohio | Trade | 625,906 |
The case representatives are as follows:
| Representatives | |||
| Role | Name | Firm | Location |
|---|---|---|---|
| Debtors' Counsel | Stephen M. Pezanosky | Haynes and Boone |
Fort Worth, Texas |
| Ian T. Peck | |||
| David L. Staab | |||
| Debtors' CRO | Gary Barton | Alvarez & Marsal |
Houston |
| Counsel to Ares Capital Corporation |
Charles M. Persons | Sidley Austin |
Dallas |
| Juliana L. Hoffman | |||
| Dennis M. Twomey | Chicago | ||
| Julia Philips Roth | |||
| Financial Advisor to Ares Capital Corporation |
N/A | FTI Consulting |
N/A |
| Counsel to PlainsCapital Bank |
Holland N. O'Neil | Foley & Lardner |
Dallas |
| Thomas S. Scannell | |||
| Debtors' Claims Agent | Robert Jordan | KCC | El Segundo, Calif. |
DIP Financing Motion
The debtors request DIP financing in the form of a revolving facility with Ares as DIP agent, in an amount up to $11 million ($3.5 million on an interim basis).
The DIP financing bears interest at LIBOR plus 9.5%, with 2% added for the default rate, and matures on the earliest of 180 days from the petition date, 30 days after entry of the interim order if the final order has yet to be entered, the effective date of a plan of reorganization or liquidation, consummation of a sale of all or substantially all of the debtors’ assets, dismissal or conversion of the cases, appointment of a trustee or receiver, filing of a plan that is not an “Acceptable Plan” without the DIP lenders’ prior written consent, termination of the DIP commitments or acceleration of the DIP loans.
An “Acceptable Plan” is defined as a plan and DS “acceptable to the DIP Lenders in their sole and absolute discretion as confirmed in writing by the DIP Agent.”
The proposed DIP liens would not prime the following pre-existing first priority, senior liens as of the petition date: “(i) the ABL Lender in the ABL Priority Collateral (including, without limitation, any and all Cash Collateral constituting ABL Priority Collateral); or (ii) the MAALT Lender in the MAALT Collateral (including, without limitation, any and all Cash Collateral constituting MAALT Collateral).” The debtors do propose DIP liens on avoidance actions and their proceeds subject to the final order. The DIP obligations would also constitute superpriority administrative expense claims “subject to (i) the Carve-Out; and (ii) the ABL Lender’s and MAALT Lender’s respective credit bid, lien rights and repayment rights in the sale or other disposition of any ABL Priority Collateral or MAALT Collateral.”
The prepetition term loan lenders have agreed to the use of cash collateral, according to the motion, and the debtors are not seeking authority by the motion to use cash collateral constituting “ABL Priority Collateral of PlainsCapital or MAALT Collateral of MAALT.”
The DIP includes adequate protection (to the extent of a diminution in value of collateral) for the term loans “in consideration for being primed by the DIP Lenders’ claims and liens.” The term loans would receive replacement liens and superpriority administrative expense claims with priority “immediately junior to the DIP Liens, subject to, junior and subordinate to the priority of the ABL Lender’s liens in the ABL Priority Collateral, the MAALT Lender’s liens in the MAALT Collateral, and subject to the Carve-Out.” The term loans would also receive adequate protection payments of professional fees and expenses.
The debtors also propose to provide financial reporting to the DIP lenders, ABL lender and the MAALT lender.
In addition, subject to the final order, the debtors propose 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 carveout for professional fees of the debtors is $500,000 and for any official unsecured creditors’ committee, $100,000.
The proposed budget for the use of the DIP facility is HERE.
The DIP financing is subject to the following milestones:
- Final DIP order: Within 30 days of entry of interim DIP order
- Filing of an “Acceptable Plan” and DS: Within 21 days of petition date
- DS order: Entered within 50 days of petition date
- Confirmation order: Entered within 80 days of petition date (acceptable to the DIP lenders and confirming an “Acceptable Plan”)
- Effective date: Within 92 days of petition date
The lien investigation deadline is 30 days after appointment for an official unsecured creditors’ committee, and for other parties in interest, 45 days after the petition date. The UCC investigation budget is $25,000.
Lease/Contract Rejection Motions
The debtors have filed nine motions to reject a total of 577 certain executory contracts and unexpired leases, including, among others, railcar leases, management services agreements, employment agreements, equipment leases, sales agreements, rental agreements, user agreements and settlement agreements. The First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth and Ninth are linked here.
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. 20-42002.
- Notice of designation as complex chapter 11 case
- Motion to pay employee wages and benefits
- The debtors estimate their average bi-weekly payroll to be approximately $297,000. As of the petition date, the debtors owe approximately $203,000 with respect to unpaid wages and salaries, $41,000 with respect to prepetition payroll taxes, $10,000 with respect to prepetition deductions, $1,000 with respect to a benefit service provider, $344,000 with respect to health benefits plan, $45,000 with respect to premiums under the employee insurance coverage.
- Motion to use cash management system
- The company has 15 bank accounts with PlainsCapital Bank and one account with 1st Source Bank.
- Motion to pay taxes and fees
- As of the petition date, the debtors owe approximately $10,000 in sales and use taxes, all of which will become due within 30 days of the petition date.
- Motion to provide utilities with adequate assurance
- Motion to file a consolidated creditors list
- Motion to extend the schedules/statements filing deadline to July 23
- Application to appoint KCC as claims agent
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