UPDATE 1: 8:51 a.m. ET 9/30/2020
: Under the terms announced
today in Superior’s Restructuring Support Agreement, the company’s senior noteholders have the right to decide whether or not to separate the business into two companies, “RemainCo” and “NAM”, upon completion of the restructuring transactions.
According to the release, the company is in discussions with its credit providers to secure financings that would be provided under either scenario. Additionally, certain members of the ad hoc noteholder group have executed a commitment letter to provide up to $200 million in a delayed draw term loan to consolidated Superior or RemainCo, as the case may be, if needed. As detailed below, in cleansing materials
, Superior disclosed $258.5 million of liquidity as of Aug. 31.
Superior also disclosed a key employee retention program, or KERP, approved on Sept. 28 that provides for one-time retention payments equal to approximately $7.3 million in the aggregate to six executive officers of Superior Energy. The KERP further provides for up to $2.5 million of retention payments to other non-executive employees of Superior Energy.
To the extent the aforementioned separation occurs, the separated NAM unit would represent Superior’s U.S. onshore businesses, including service rigs, coiled tubing, wireline, pressure control, flowback, fluid management, accommodations and discontinued pressure pumping assets. The company’s global service lines, RemainCo, would remain with Superior, including premium drill pipe rentals, bottom hole assemblies, completion tools and products, hydraulic workover, snubbing and production services and well control services.
The release says that separation of NAM and RemainCo would result in the following economic terms upon emergence from Chapter 11:
- RemainCo: The company’s senior noteholders would receive 98.5% of RemainCo’s equity, while existing shareholders would receive 1.5% of such equity, in each case subject to dilution on account of a management incentive plan and RemainCo warrants.. Existing shareholders would receive five-year warrants to purchase 10% of RemainCo equity at a price equivalent to par plus accrued interest on the senior unsecured notes.
- NAM: The company’s senior noteholders would receive 95% of NAM’s equity, while existing shareholders would receive 5% of such equity, in each case subject to dilution from the MIP.
If the company remains consolidated, upon emergence from Chapter 11, the company’s senior noteholders would receive 98% of consolidated Superior’s equity, while existing shareholders would receive 2% of such equity, in each case subject to dilution from the MIP and the consolidated Superior warrants. Existing shareholders would receive five-year warrants to purchase 10% of consolidated Superior equity at a price equivalent to par plus accrued interest on the notes.
Ducera Partners and Johnson Rice & Company are acting as financial advisors to the company while Latham & Watkins, LLP serves as legal counsel, and Alvarez & Marsal serves as restructuring advisor. Evercore is acting as financial advisor to the ad hoc noteholder group while Davis Polk & Wardwell LLP serves as legal counsel.Cleansing Materials
In an 8-K
disclosing its RSA and delayed-draw term loan commitment letter, Superior also provided cleansing materials pursuant to confidentiality agreements signed with consenting noteholders. As shown below, the company disclosed $258.5 million of liquidity:
Superior provided the following RemainCo and NAM financial projections:
Additionally, Superior provided the following TotalCo financial projections:
Original Story 7:10 a.m. UTC on Sep. 30, 2020BREAKING: Superior Energy Enters RSA with Approximately 69.2% of Unsecured Notes, Transaction Would Deleverage 100% of Debt; Expects to Implement Via Chapter 11Relevant Document:Release
Superior Energy Services announced in a press release this morning that it has entered into a restructuring support agreement with a group of its senior noteholders that collectively hold or control approximately 69.2% of the company’s senior unsecured notes. The proposed comprehensive financial recapitalization would deleverage 100% of the company’s long-term debt and related interest costs, according to the release. The transactions contemplated by the RSA are expected to close before the end of 2020.
Superior expects to implement the transactions contemplated by the RSA through a “pre-packaged” plan of reorganization through the filing of voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the Southern District of Texas. Superior intends to continue engaging in discussions with its creditors that are party to the RSA. Senior noteholders that execute the RSA within five business days of the date of the RSA will receive a cash payment equal to the amount of outstanding accrued interest on such senior noteholders’ notes.
As part of the recapitalization, the company and the ad hoc noteholder group are contemplating separating Superior’s business into two separate companies. To the extent the separation occurs, Superior’s U.S. onshore businesses, including service rigs, coiled tubing, wireline, pressure control, flowback, fluid management, accommodations, and discontinued pressure pumping assets would become a new consolidation platform for U.S. onshore assets. The company’s globally diversified service lines would remain with Superior, including premium drill pipe rentals, bottom hole assemblies, completion tools and products, hydraulic workover, snubbing and production services, and well control services.
More to come...