Relevant Documents:Cash Collateral MotionCFO Declaration
At a brief hearing this afternoon, Judge David Jones approved all of the first day relief sought by the
Whiting Petroleum debtors, including the debtors’ consensual request for authority to use their RBL lenders’
cash collateral on a short two-week interim basis. According to Greg Pesce of Kirkland & Ellis, counsel for the debtors, Whiting will continue negotiating a longer, “second interim” cash collateral budget and order with RBL agent JPMorgan, which the judge tentatively set for hearing April 15 at 3:30 p.m. ET.
The initial budget, found
HERE, runs through April 15 and anticipates the debtors generating negative $190.6 million in net cash flow in the April 1-15 period. The cash collateral motion contemplates adequate protection for the RBL lenders in the form of replacement liens, liens on avoidance action proceeds, superpriority claims, regular interest payments (applying a 2% premium to prepetition rates) and payment of RBL lenders’ professional fees. The proposed cash collateral order also includes typical stipulations and waivers regarding the extent, validity and priority of the RBL lenders’ liens and waivers of surcharge rights and the “equities of the case” doctrine. The order finally includes a $5 million post-default carve-out for professional fees and expenses.
Reorg’s live coverage of the Whiting Petroleum first day hearing can be found
HERE.
According to Brian Schartz of Kirkland & Ellis, the debtors also remain in negotiations with their noteholders on a proposed restructuring support agreement. Schartz told the judge that a noteholder “steering committee” holding approximately 55% of the debtors’ $3.4 billion in unsecured notes has signed on to the
debt-for-equity exchange contemplated by a term sheet filed with the SEC earlier today. Schartz called the restructuring proposal “straightforward”: The $1.072 billion outstanding on the debtors’ RBL (including a $650 million
draw honored on March 27) would be refinanced, noteholders would receive 97% of reorganized equity, trade creditors would be paid in full, and existing equityholders would receive 3% of reorganized equity and warrants for up to 15% of additional stock.
Schartz told the judge that this transaction would leave the company on “much stronger footing” than if it had paid its
interest coupon due today and then waited for an anticipated RBL borrowing base reduction.
According to Schartz, the company did not undertake “a single ounce of planning” for a chapter 11 filing until March 20. At the end of 2019, the company did not anticipate having to file for chapter 11 in 2020, Schartz indicated
. However, falling oil prices in March, combined with today’s bond maturity, put “immediate pressure” on the debtors to make a decision, according to Schartz. In the face of this “unprecedented” price decline, RBL institutions have become significantly “bearish,” Schartz told Judge Jones, and the debtors feared a significant
reduction of their borrowing base.
In addition to approving the debtors’ interim cash collateral request after asking for a technical modification to the RBL agent’s default remedies, Judge Jones also granted the debtors’ motions to pay prepetition taxes, trade claims, royalty payments and mineral interest obligations on a final basis, along with the debtors’ NOL trading motion, motion to continue insurance and surety programs, and motion to set adequate assurance for utilities. Judge Jones granted the debtors’ cash management and hedging transactions motions on an interim basis, with a second day hearing set for May 6 at 12 p.m. ET.