Fri 09/24/2021 13:14 PM
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Relevant Documents:
Voluntary Petition
Bid Procedures Motion
First Day Declaration
DIP Financing Motion
First Day Hearing Agenda

To view the relevant documents above as well as our First Day team's coverage of all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities including the Rockdale Marcellus chapter 11 request a trial here:

Rockdale Marcellus is an independent exploration and production company with a natural gas-focused asset base, concentrated in the Marcellus Shale in Pennsylvania
Seeks to sell assets or effectuate stand-alone reorganization through a dual-track process, as well as to reject a “costly” midstream contract with UGI Energy Services
Case would be funded from existing RBL lenders, who would provide $20 million in new-money DIP financing, along with a rollup of $40 million of prepetition obligations

Rockdale Marcellus LLC, a Canonsburg, Pa.-based independent exploration and production company with a natural gas focused asset base, concentrated in the Marcellus Shale in Pennsylvania, filed for chapter 11 protection on Tuesday, Sept. 21, in the Bankruptcy Court for the Western District of Pennsylvania, along with Rockdale Marcellus Holdings LLC.

“Building upon the Debtors’ pre-petition marketing and restructuring efforts, the Debtors are pursuing dual tracks to maximize the value of the estates, which will result in an asset sale restructuring, which allows the Debtors to enter into a sale transaction for the sale or disposition of the Debtors’ assets, or a standalone plan of reorganization,” the debtors say. The debtors seek to run a marketing process for plan sponsors or purchasers that allows for the selection of one or more stalking horse bidders.

The debtors say that although a recent increase in natural gas prices arrived “too late,” the upward price movement “presents an opportunity for significant future upside return when development capital is made available to fund additional drilling and completions activities.”

The case would be funded by DIP financing from existing first lien RBL lenders, with Delaware Trust Co. as administrative agent, who have agreed to provide $20 million in new money plus a $40 million rollup of the prepetition RBL obligations (about 35% of the outstanding principal owed). The DIP credit agreement lists the following DIP lenders: Star V Partners LLC, Blackwell Partners LLC - Series A, Alta Fundamental Advisors Master LP and Alta Fundamental Advisers SP LLC - Series R.

The first day hearing is set for Monday, Sept. 27, at 1 p.m. ET.

In May, funds managed by Alta Fundamental Advisers acquired 100% of the debtors’ first lien RBL credit facility, providing “breathing space” for the debtors and Alta to determine to pause an ongoing sale process to consider a restructuring path. “In the months that followed, the Debtors and Alta explored a variety of alternative restructuring paths, including an equity recapitalization, restructuring the Debtors’ second lien debt, and negotiating more favorable terms under their gas gathering agreement with UGI Texas Creek, LLC,” the debtors say, adding that none of these paths “proved viable within the time available to the Debtors.” The debtors engaged Houlihan Lokey as their new investment banker on Sept. 16.

The company reports $100 million to $500 million in both assets and liabilities. The company’s prepetition capital structure as of Sept. 21 is as follows:

As original prepetition RBL lender and administrative agent, Citizens entered into several hedge agreements with the debtors, and Shell Trading Risk Management LLC and J. Aron & Co. also each entered into hedge agreements with the debtors. Citizens terminated its hedge in early May, after which Citizens and the debtors agreed in writing that the aggregate principal amount due on account of early termination was $3.7 million excluding interest. The RBL lenders subsequently acquired the claim from Citizens. J. Aron also terminated its hedge in early May, resulting in a secured claim of approximately $5.1 million against the debtors. The Shell hedge has not been terminated, but if terminated as of Sept. 23, the debtors say that it would have a claim in excess of $20 million against the debtors. The debtors say that they intend to continue to pay them monthly hedge settlements to Shell.

Delaware Trust Co. is the successor administrative agent and collateral agent to Citizens Bank under the RBL facility, and White Oak Global Advisors is the agent under the term loan. The RBL facility is secured by a first lien on substantially all of the debtors’ assets, with the term lenders in second lien position. Pursuant to an intercreditor agreement, the prepetition second lien agent, on behalf of the second lien lenders, has agreed to not to object to any DIP financing provided by or consented to by the prepetition RBL lenders and the use of cash collateral, and agreed to subordinate the prepetition second liens to the prepetition RBL liens, the prepetition third-party hedge liens and the DIP liens.

The debtors have only $1,209 of “funds” as of the petition date, and as of the week ending Oct. 1, the debtors have more than $3 million of payments due.

Rockdale Marcellus Holdings is owned by a group of individual and institutional investors, including members of the debtors’ senior management team, who own common units indirectly in Rockdale tMarcellus LLC through an aggregator entity known as Rockdale Holdings LLC. Tsunami Marcellus Partners LP is the single largest equityholder in Rockdale Marcellus Holdings, owning more than 85% of the preferred A units. Rockdale Marcellus, LLC is the wholly owned subsidiary of Rockdale Marcellus Holdings.

The debtors are represented by Reed Smith in Pittsburgh, Pa., as counsel and Houlihan Lokey as investment banker. John DiDonato of Huron Consulting Services is the chief restructuring officer. Epiq is the claims agent. The case has been assigned to Judge Gregory L. Taddonio. The jointly administered case number is 21-22080.

Events Leading to the Bankruptcy Filing / Prepetition Restructuring Efforts

The debtors say that “like many other participants in the oil and gas sector” they have struggled “during a sustained period of depressed commodity pricing,” leading to a borrowing base redetermination by RBL lenders and a “costly” agreement with UGI Energy Services for gathering and transportation of gas from wellhead to market. Prepetition efforts have spanned nearly a year, including a sales process, attempted renegotiation of the UGI agreement and discussions with secured creditors who have been in default forbearance for about nine months.

The debtors determined to file after failing to achieve an out of court solution, and as part of their dual-prong sale and plan strategy, seek to reject the UGI agreement to allow bidders to bid for assets with or without UGI providing gathering/transportation services. Under the plan toggle, the debtors say that they anticipate the need for the “injection of substantial capital,” and say that the proposed rejection of the UGI agreement “may help initiate such an event,” but that ultimate rejection would be at the option of any plan sponsor.

The debtors say that even if prices returned to their five-year average, the debtors’ business would remain unsustainable if the UGI contracts stay in place.

In October 2020, the prepetition RBL agent reduced the debtors’ borrowing base from $115 million to $100 million, forcing the debtors to pay down the $15 million deficiency in five monthly payments of $3 million and rejected the certain of the debtors’ proposals for alternative sources of drilling capital. By January, the debtors informed the prepetition RBL parties that they lacked the liquidity to make any further deficiency payments. The debtors and the prepetition RBL properties entered into credit agreement amendments that obligated the debtors to run a sale and marketing process led by Intrepid Partners and to concurrently commence preparations to file for chapter 11 protection.


Rockdale Marcellus is an independent E&P company with a focus on natural gas assets. The debtors’ primary production and development activities are in the Marcellus Shale in Pennsylvania, where the debtors have more than 49,000 net leasehold acres, including 68 currently producing horizontal natural gas wells in the northeastern Pennsylvania counties of Lycoming, Bradford and Tioga.

The debtors funded the acquisition and development of the Texas Creek assets through a combination of approximately $73 million in debt and $24.3 million in equity financing at closing (with subsequent equity raised post-closing).

The company’s corporate organizational structure is shown below:

The debtors' largest unsecured creditors are listed below:

10 Largest Unsecured Creditors
Creditor Location Claim Type Amount
White Oak Global Advisors San Francisco Loan $    50,542,962

Aqua-ETC Water Solutions LLC
Dallas Trade 2,041,667
Profrac Services LLC Fort Worth, Texas Trade 1,285,381
Chemstream Inc. Homer City, Pa. Trade 465,021
Cudd Pressure Control Inc. Houston Trade 244,251
Chesapeake Operating LLC Oklahoma City Trade 201,415
Ally Consulting LLC Lakewood, Colo. Trade 152,897
Express Energy Services Operating LP Houston Litigation 135,000
Peak Oilfield Services Gainesville, Texas Trade 129,962
Moore Trucking LLC Canton, Pa. Trade 120,279

The case representatives are as follows:


Role Name Firm Location
Debtors' Counsel Keith M. Aurzada Reed
Omar J. Alaniz
Lindsey L. Robin
Devan J. Dal Col
Luke A. Sizemore Pittsburgh
Jared S. Roach
Alexis A. Leventhal
Debtors' Investment
Daniel F. Crowley III Houlihan
Brad Bucher
Debtors' CRO John DiDonato Huron
New York
Counsel to the
Prepetition RBL
John R. Ashmead Seward
& Kissel
New York
Gregg S. Bateman
Counsel to the
Prepetition RBL
Robert J. Stark Brown
New York
Steven B. Levine
Co-Counsel to the
Prepetition 2L Agent
Darren S. Klein Davis Polk
& Wardwell
New York
Adam L. Shpeen
Co-Counsel to the
Prepetition 2L Agent
Michael R. Proctor Bowles
Canonsburg, Pa.
United States
Jodi Hause Office of the
U.S. Trustee
Norma Hildenbrand
Debtors' Claims
Sophie Frodsham Epiq New York

DIP Financing Motion

The debtors seek approval of DIP financing consisting of $20 million in new money ($5 million on an interim basis) and a rollup up to $40 million of the prepetition RBL facility. The debtors seek approval of the rollup on an interim basis.

The DIP financing bears interest at 11.25% (to be paid either in cash or PIK, at the debtors’ option), with 2% added for the default rate, and matures on March 15, 2022.

To secure the DIP financing, the debtors propose to grant priming liens on the debtors’ assets senior to (a) all liens and security interests in favor of the prepetition RBL agent (except for “Prepetition RBL Permitted Prior Liens”) and (b) all liens and security interests in favor of the prepetition second lien agent. The DIP liens would include avoidance action proceeds subject to the final order. According to the DIP motion, “the parties holding the primed liens - i.e., the Prepetition RBL Parties and the Prepetition Second Lien Parties - have consented, or are deemed to have consented pursuant to the Intercreditor Agreement.” The DIP would also have superpriority administrative expense status.

The facility includes various fees, including a 5% closing fee “on the entire New Money DIP Commitments or $1,000,000.00,” a $35,000 administrative agent fee and a 0.5% commitment fee.

In support of the proposed DIP financing, the debtors filed the declaration of CRO John DiDonato, who states that the 1:2 rollup ratio is “very well supported by other case precedent and is a fair reflection of today’s market expectations.” The debtors argue the DIP is needed given the potential for a “sudden drop in natural gas prices,” and stress that in DIP negotiations the prepetition RBL lenders made “important concessions,” in the form of “substantial” extensions in case milestones and removal of “anti-cash-hoarding” requirements.

The company proposes replacement liens and superpriority administrative expense claims as adequate protection for the prepetition RBL parties, J. Aron and the second lien lenders, as well as payment of professional fees of the RBL agent and lenders and J. Aron (with the aggregate amount of prepetition and postpetition fees and expenses to J. Aron subject to a $200,000 cap).

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 carve-out for professional fees is $2.5 million.

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

The DIP financing is subject to the following milestones:

  • Interim DIP order: Entered within six business days of the petition date;

  • Motion to reject UGI agreement and determine it does not constitute a covenant running with the land: Filed within 14 days of petition date;

  • Bid procedures order: Entered within 30 days of petition date;

  • Final DIP order: Entered within 35 days of petition date;

  • Auction (if any) and determine if the highest and best bid is approved sale or approved plan of reorganization: Within 90 days of petition date;

  • Entry of sale order/file plan of reorganization: Within 105 days of petition date;

  • Sale consummation: Within 120 days of petition date;

  • DS approval order: Entered within 135 days of petition date;

  • Confirmation order: Entered within 170 days of petition date; and

  • Plan effective date: Within 175 days of petition date.

The lien challenge deadline is 60 days from appointment for an official committee of unsecured creditors, or if a committee is not appointed, 75 days from entry of the interim DIP order for other parties in interest. The UCC lien investigation budget is $50,000.

Bid Procedures Motion

The debtors began a sale process in January through Intrepid Partners, resulting in 10 indications of interest and three binding bids, all of which were below the balance of the debtors’ first lien debt. Thereafter, in May, after funds managed by Alta Fundamental Advisers acquired the debtors’ first lien debt, the company, in consultation with Alta, determined to pause the sale process to consider restructuring options. The debtors engaged Houlihan Lokey as their new investment banker on Sept. 16.

In the event of selection of one or more stalking horse bidders, the debtors propose a breakup fee of up to 3% and expense reimbursement up to $550,000. Initial overbids must exceed the stalking horse bid and the breakup fee and expense reimbursement, plus $500,000. Overbids at auction are to be determined, provided that overbids by a stalking horse “need only exceed the then Subsequent Bid, less the amount of the Bid Protections payable to such Stalking Horse Bidder, by $500,000.”

The proposed sale timeline follows:

Other Motions

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


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