U.S.-based energy firm Breitburn Energy Partners LP filed for Ch-11 bankruptcy, on being negatively impacted by falling oil prices. The company filed for restructuring in the U.S. Bankruptcy Court in New York, with reported assets of $4.7bn and debts of $3.4bn as of 31 March 2016.
According to company CFO James Jackson, the decision to file for bankruptcy was made when persistent negotiations with lenders failed and an out-of-court restructuring agreement would have affected the company’s liquidity severely.
The company has lined up a $75m DIP financing facility, and is in talks with senior lenders to include an additional $75m, if certain conditions were met.
A talking point during Breitburn’s restructuring would include its hedging assets, contracts that cushion the company’s cash holdings against oil price volatility. The company estimates that proceeds of its hedging agreements could be up to $500m, which, outside bankruptcy, could be “a significant source of liquidity.”
However, some of the Breitburn’s senior lenders have objected to the distribution of proceeds arising from hedging arrangements during bankruptcy as they are counter-parties to it.