Magnum Hunter Resources announced on Tuesday that they filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code to facilitate the restructuring of their consolidated balance sheet through a prearranged restructuring plan. As a part of the restructuring agreement, the lenders, who hold 75 percent of the company’s debt, have agreed to extend a $200 million loan to help the company throughout the chapter 11 process.
In a statement, Magnum Hunter said that it anticipates that the above mentioned debtor-in-possession financing will provide sufficient liquidity to stabilize the company’s operations and satisfy key vendor, employee, and other key stakeholder commitments for the duration of the restructuring process.
Gary C. Evans, Chairman and Chief Executive Officer of Magnum Hunter, said: “With the unified support of our various lenders, we anticipate this restructuring will be a success and unprecedented in our industry. I believe this restructuring will position Magnum Hunter as a market leader in the upstream sector with an ideal capital structure to capitalize on the large number of opportunities anticipated in our industry due to the precipitous commodity cycle downturn affecting the industry as a whole.”
Mr. Evans continued: “At a very challenging time for the entire energy industry, when many of our competitors have been forced to either file for bankruptcy without a plan to emerge in place or continue to attempt to restructure with creditors without an ‘end game,’ our global restructuring accomplishment is definitely an outlier. We expect the entire process to be efficient, cost effective, and quick. We also anticipate emerging from bankruptcy financially stronger than ever before.”
Like many other exploration and production companies, Magnum Hunter’s operations have been significantly impacted by the recent and continued dramatic decline in both oil and natural gas prices, as well as natural gas liquids prices, and general uncertainty in the overall energy markets. These macro-economic factors, coupled with Magnum Hunter’s substantial debt obligations, resulted in the Company’s decision to explore all strategic restructuring alternatives to reduce its overall debt and achieve a sustainable reconstituted capital structure
Magnum Hunter has been known to struggle for some time now. In January 2015, the company announced that it would limit its spending to just $100 million this year after its shares plunged 81 percent in 2014 amid sinking natural gas prices. This was followed by an announcement in May that the company decided to divest its assets in Tyler County, West Virginia, to an unnamed, independent exploration and production company.
Magnum Hunter also owns an approximately 45 percent equity ownership interest in Eureka Hunter Holdings, LLC. Eureka Hunter Holdings, LLC and its subsidiaries are not part of the Company’s chapter 11 bankruptcy proceedings.
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