U.S-based oil E&P firm Warren Resources, Inc. is engaged in discussions with its first lien and second lien lenders and an ad hoc group of unsecured noteholders, regarding a restructuring of its debt obligations. These discussions would continue either through an out-of-court restructuring settlement or through a bankruptcy court proceeding.
First lien lenders under Warren’s credit facility had made a restructuring proposal that would help the company deleverage by converting a substantial amount of its debt into equity.
Warren had presented this proposal to its second lien lenders and to the holders of more than 95% of its unsecured bonds.
However, a consensus agreement among all three categories of creditors has not been reached. Failure to reach an agreement may force the company to file for bankruptcy.
As of 31 March 2016, Warren’s first lien creditors held debt of approximately $235m, second lien creditors held debt of approximately $52m and unsecured bondholders held approximately $167m of its senior unsecured notes. During the same period, cash position was $16.85m, of which $10.04m was in a restricted account under the control of the lenders under its first lien credit facility.
Warren elected not to make an interest payment of approximately $7.5m interest payment on 1 February 2016 on its unsecured notes.
With the expiry of the applicable 30-day grace period for the interest payment, as per the indenture governing the notes, the trustee and bondholders holding atleast 25% of the unsecured notes have the right demand payment of the entire principal amount of the notes plus unpaid interest.
In addition, this creates a cross-default on other debt instruments of Warren as well. However, no such acceleration on Warren’s debt obligations has occurred so far.
Warren’s advisors on its debt restructuring are Andrews Kurth LLP (as restructuring counsel) and Jefferies LLC (as financial advisor).