Eagle Ford Shale operator Atlas Resource Partners LP announced on Monday that the partnership has entered into a Restructuring Plan with 100% of its Revolving Credit Facility lenders, 100% of its Second Lien lenders and approximately 80% of its Senior Note holders. To commence the implementation of the Restructuring Plan, the partnership expects to file a pre-packaged Chapter 11 bankruptcy filing on or about July 27, 2016.
Following a successful implementation of the Restructuring Plan the partnership expects to emerge from the execution of the Restructuring Plan as Titan Energy, LLC, which will be classified as a corporation for U. S. federal income tax purposes.
If the Restructuring Plan is completed, it will immediately reduce the partnership’s debt by approximately $900 million and interest expense by $80 million per year.
The debt reduction is accomplished through the conversion of the $668 million of the partnership’s outstanding senior notes into 90% of the common equity of the restructured company upon consummation of the Restructuring Plan and from the proceeds of the sale of the partnership’s natural gas and oil hedge positions to make repayments under its existing Revolving Credit Facility.
Under the terms of the agreement, the cash interest expense payable on the Second Lien Term Loan will be immediately reduced to 2% upon the commencement of the restructuring proceedings.
The Second Lien Term Loan holders will also receive 10% of the common equity of the emerged company. In consideration of its agreement to provide administrative management, operating and other services following the restructuring, a subsidiary of Atlas Energy Group, LLC, the general partner of the partnership, will receive a 2% economic interest in the restructured company.
The partnership expects to operate its oil and gas properties in the ordinary course during the restructuring process. All suppliers, vendors, employees, royalty owners, trade partners and landlords will be paid in full under normal terms for goods and services provided prior to, during, and subsequent to the consummation of the Restructuring Plan. The partnership’s existing trade contracts and terms will also be maintained prior to, during and subsequent to the process.
Under the terms of the agreement, the partnership’s existing common and preferred unit holders will not be entitled to any of the equity of the restructured company, and all existing common and preferred units will be cancelled.
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