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Vanguard Natural Resources Files Amended Plan and Disclosure Statement to Reflect Plan Support Agreement, Including Support of Noteholder Group; Requests July 10 Confirmation Hearing

Jun 13, 2019 (New Generation Research via COMTEX) --

<p>June 11, 2019 &ndash; The Debtors filed an Amended Plan and a related Disclosure Statement; with each document including redlines showing changes to the versions filed on April 30, 2019 [Docket Nos. 472 and 473]. The Debtors also filed an amended liquidation analysis which makes modifications to the version that had otherwise been attached to the amended Disclosure Statement at Exhibit E [Docket No. 474].</p><p><strong>Plan Overview</strong></p><p>The Disclosure Statement makes considerable changes as its description of the restructuring transaction, with much of the amended disclosure reflecting changes resulting from the Debtors&#39; May 8, 2019 execution of a plan support agreement with key stakeholder groups and the subsequent decision by a group representing holders of the Debtors&#39; 2024 Second Lien Notes to support the Plan. The amended summary now reads:</p><p>"In early 2019, the Debtors, with the assistance of their advisors, commenced substantive comprehensive restructuring negotiations with certain creditor constituencies, including: (a) the administrative agent and the holders of at that time, approximately 38 percent of the approximately $677.7 million in revolving obligations outstanding under that certain credit agreement dated August 1, 2017, by and among Vanguard Natural Gas, LLC (&ldquo;VNG&rdquo;) as borrower, Citibank, N.A. (&ldquo;Citi&rdquo;) as administrative agent and issuing bank, and the lenders party thereto (the &ldquo;Steering Committee,&rdquo; and such agreement as amended, supplemented, or modified from time to time in accordance with the terms therein, the &ldquo;Credit Agreement&rdquo;); and (b) the holders of approximately 75 percent of the Debtors&rsquo; approximately $80.7 million aggregate principal amount outstanding of 9.0 percent senior secured second lien notes due 2024 (the &ldquo;Noteholder Group,&rdquo; and such notes, the &ldquo;Senior Notes&rdquo;). Prior to the Petition Date, these discussions culminated in the Debtors securing new money financing up to $65 million under a new senior secured superpriority, priming debtor-in-possession credit facility (the &ldquo;DIP Facility&rdquo;) and agreement on certain key milestones to keep these cases moving forward. Following the Petition Date, discussions continued and the Debtors also engaged with the holders of approximately 20 percent of the $123.4 million in principal amount of term loan obligations outstanding under the Credit Agreement (the &ldquo;Ad Hoc Term Loan Lender Group&rdquo;).</p><p><strong>Ultimately, the Debtors, the Steering Committee, and the Ad Hoc Term Loan Lender Group reached an agreement as to the terms of a comprehensive and consensual restructuring of the Debtors, as set forth in that certain plan support agreement, dated as of May 8, 2019</strong>, a copy of which is attached hereto as Exhibit B (as amended from time to time and including all exhibits thereto, the &#39;Plan Support Agreement&#39;). During the weeks that followed the execution of the Plan Support Agreement, the Debtors, the Steering Committee, and the Ad Hoc Term Loan Lender Group continued to engage with the Noteholder Group.<strong>&nbsp;In early June, following extensive discussions, the members of the Noteholder Group agreed to support the Plan (as modified)</strong>, and the Debtors anticipate the Noteholder Group will become party to the Plan Support Agreement in the very near future (the Ad Hoc Term Loan Lender Group, the Steering Committee, the Noteholder Group, and the other Consenting Lenders are collectively referred to as the &ldquo;Consenting Stakeholders&rdquo;).&nbsp;</p><p>The Plan Support Agreement contemplates a comprehensive restructuring that will result in a <strong>substantial deleveraging of the Debtors&rsquo; balance sheet by approximately $532 million</strong> and provide a meaningful recovery to the Debtors&rsquo; stakeholders. Upon consummation of this restructuring, the Debtors will be positioned to capitalize on their attractive asset base as the oil and gas industry looks to recover from the sustained downturn in commodities prices. The key financial components and commitments of the restructuring are as follows:</p><ul><li>Holders of Allowed DIP Facility Claims will receive their Pro Rata share of participation in a post-Effective Date first lien first-out reserve-based revolving credit facility with an initial borrowing base of $65 million (which will be reduced on a dollar--for--dollar basis equal to 75 percent of the net cash proceeds of any assets of the Reorganized Debtors prior to the Effective Date) and a first lien second-out term loan lending facility in the aggregate amount of $65 million (the &#39;Exit RBL/Term Loan A Facility and the administrative agent thereunder, the &#39;Exit RBL/Term Loan A Facility Agent&#39; and the secured parties thereunder, the &#39;Exit RBL/Term Loan A Facility Secured Parties&#39;);</li><li>Holders of Allowed Revolving Credit Facility Claims and Allowed Secured Swap Claims that are Secured Claims will receive their Pro Rata share of and interest in: (i) a new first lien last-out term loan lending facility in the aggregate amount of $285 million (the &#39;Exit Term Loan B Facility,&#39; and together with the Exit RBL/Term Loan A Facility, the &#39;Exit Facilities&#39; and the administrative agent under the Exit Term Loan B Facility, the &#39;Exit Term Loan B Facility Agent&#39; and the secured parties thereunder, the &#39;Exit Term Loan B Secured Parties&#39;); (ii) $390,635,705.06 of the new series of class A preferred stock to be issued by Reorganized Vanguard on the Effective Date (the &#39;New Preferred Equity Class A Stock&#39;), subject to the elections of holders of Class 4 Allowed Term Loan Claims as set forth below; and (iii) 75 percent of the new common stock of Reorganized Vanguard (the &#39;New Common Stock&#39;), subject to dilution on account of the Management Incentive Plan (if any);</li><li>Holders of Allowed Term Loan Claims will receive a Pro Rata share and interest in: (i) 10 percent of the New Common Stock, subject to dilution on account of the Management Incentive Plan (if any); and (ii) at the option of each holder, such holder&rsquo;s Pro Rata share of up to $64,134,335.87 of the New Preferred Equity Class A Stock or the new series of class B preferred stock to be issued by Reorganized Vanguard on the Effective Date (the &#39;New Preferred Equity Class B Stock&#39;);</li><li>Holders of Allowed Senior Notes Claims will receive a Pro Rata share and interest in: (i) $7,000,000.00 of the New Preferred Equity Class A Stock; (ii) 15 percent of the New Common Stock, subject to dilution on account of the Management Incentive Plan (if any); and (iii) the Senior Notes Claim Cash, payable to the Senior Notes Trustee in an amount&nbsp;not to exceed $60,000; and</li><li>Holders of Allowed General Unsecured Claims shall receive (to the extent such General Unsecured Claims have not already been paid in full during the Chapter 11 Cases), in full and final satisfaction, settlement, release, and discharge of, and in exchange for each Allowed General Unsecured Claim, on the Effective Date:&nbsp;<ul><li>if the Class of holders of Allowed General Unsecured Claims votes in favor of the Plan (without taking into account the votes, in principal number or amount, on account of any deficiency claims asserted on account of the Revolving Credit Facility Claims, the Secured Swap Claims, the Term Loan Claims, and/or the Senior Notes Claims), a Pro Rata share of the GUC Cash Pool; provided that (a) if Class 6 votes to accept the Plan and Class 3 votes to accept the Plan, there shall be no Allowed General Unsecured Claims on account of deficiency claims arising on account of the Revolving Credit Facility Claims and Secured Swap Claims and any such deficiency claims shall be deemed to be satisfied by the distribution to holders of Allowed Class 3 Claims; (b) if Class 6 votes to accept the Plan and if Class 4 votes to accept the Plan, there shall be no Allowed General Unsecured Claims on account of deficiency claims arising on account of the Term Loan Claims and any such deficiency claims shall be deemed to be satisfied by the distribution to holders of Allowed Class 4 Claims; and (c) if Class 6 votes to accept the Plan and if Class 5 votes to accept the Plan, there shall be no Allowed General Unsecured Claims on account of deficiency claims arising on account of the Senior Notes Claims and any such deficiency claims shall be deemed to be satisfied by the distribution to holders of Allowed Class 5 Claims; or</li><li>if the Class of holders of Allowed General Unsecured Claims votes to reject the Plan (without taking into account the votes, in principal number or amount, on account of any deficiency claims asserted on account of the Revolving Credit Facility Claims, the Secured Swap Claims, the Term Loan Claims, and/or the Senior Notes Claims), a Pro Rata share of the liquidated value of the Debtors&rsquo; assets determined to be unencumbered at Confirmation, if any; provided that, for the avoidance of doubt, in such a scenario, holders of Revolving Credit Facility Claims and Secured Swap Claims (A) shall, on account of the Revolving Credit Facility Claims and Secured Swap Claims that are not Allowed Secured Claims, participate in any distribution to holders of Allowed General Unsecured Claims (with the amount of such deficiency claims to be determined by the Court in the event the Debtors and the holders of such Revolving Credit Facility Claims and Secured Swap Claims are unable to reach agreement on the amount of such deficiency claims) and (B) reserve the right to assert their First Lien Adequate Protection Superpriority Claims (as defined in the DIP Order) against the Debtors.</li></ul></li></ul><p><strong>The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):</strong></p><ul><li>Class 1 (&ldquo;Other Secured Claims&rdquo;) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is 100%.</li><li>Class 2 (&ldquo;Other Priority Claims&rdquo;) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is 100%.</li><li>Class 3 (&ldquo;Revolving Credit Facility Claims and Secured Swap Claims&rdquo;) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is the value of the holders of such Claims&rsquo; interest in the collateral securing such Claims&nbsp;and the<strong> estimated recovery is 92.66% &ndash; 94.48%. Each holder of an Allowed Class 3 Claim shall receive a Pro Rata share of and interest in: (i) the Exit Term Loan B Facility; (ii) 75 percent of the New Common Stock Pool</strong>, subject to dilution on account of the Management Incentive Plan (if any).</li><li>Class 4 (&ldquo;Term Loan Claims&rdquo;) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $126.1mn and the <strong>estimated recovery is 17.55% &ndash; 28.57%. </strong>Each holder of an Allowed Class 4 Claim shall receive a Pro Rata share and interest in: (i) at the option of each holder of an Allowed Class 4 Claim, either (x) the Class 4 Preferred A Option or (y) the Class 4 Preferred B Option; provided that if any holder selects both Class 4 Preferred A Option and Class 4 Preferred B Option or fails to select either option, as of the applicable deadline, such holder shall receive the Class 4 Preferred B Option; and (ii) <strong>10 percent of the New Common Stock</strong>, subject to dilution on account of the Management Incentive Plan (if any).</li><li>Class 5 (&ldquo;Senior Notes Claims&rdquo;) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $80.7mn and the <strong>estimated recovery is 2.96% &ndash; 4.81%. Each holder of an Allowed Class 5 Claim shall receive a Pro Rata share and interest in: (i) if Class 5 New Common Stock Preferred Equity Class A pool (ii) 15 percent of the New Common Stock</strong>, subject to dilution on account of the Management Incentive Plan (if any); and (iii) the Senior Notes Claim Cash.</li><li>Class 6 (&ldquo;General Unsecured Claims&rdquo;) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $6,400,000 &ndash; $26,800,000.00, without taking into account any deficiency claims asserted on account of the Revolving Credit Facility Claims, Secured Swap Claims, Term Loan Claims, and Senior Notes Claims and the estimated recovery is <strong>If Class 6 votes in favor of the Plan, 2.0%</strong> (subject to the waiver of certain deficiency claims) If Class 6 votes against the Plan, less than 2.0%.&nbsp;To the extent such Claim has not already been paid in full during the Chapter 11 Cases, in full and final satisfaction, settlement, release, and discharge of, and in exchange for each allowed General Unsecured Claim, on the Effective Date each holder thereof will receive such treatment as is acceptable to the Debtors, the Required Consenting Revolver Lenders, and the DIP Agent and in accordance with the Bankruptcy Code, to be determined prior to the hearing to consider approval of the Disclosure Statement.</li><li>Class 7 (&ldquo;Intercompany Claims&rdquo;) is unimpaired/impaired and not entitled to vote on the Plan. The estimated aggregate amount of claims is $0.00 and the estimated recovery is 100% or 0%.&nbsp;Each Class 7 Claim shall be, at the option of the Debtors, the Required Consenting Revolver Lenders, and the DIP Agent, either reinstated, canceled and released without any distribution, or otherwise addressed at such parties&rsquo; discretion.</li><li>Class 8 (&ldquo;Intercompany Interests&rdquo;) is unimpaired/impaired and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is 100% or 0%. Class 8 Interests shall be, at the option of the Debtors, the Required Consenting Revolver Lenders, and the DIP Agent, either reinstated, canceled and released without any distribution, or otherwise addressed at such parties&rsquo; discretion.</li><li>Class 9 (&ldquo;Existing Equity Interests&rdquo;) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is $0 and the estimated recovery is 0%.</li><li>Class 10 (&ldquo;Section 510(b) Claims&rdquo;) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is $0 and the estimated recovery is 0%.</li></ul><p><strong>The following exhibits were attached to the Disclosure Statement:</strong></p><ul><li>Exhibit A: Plan of Reorganization&nbsp;</li><li>Exhibit B: Plan Support Agreement&nbsp;</li><li>Exhibit C: Corporate Organization Chart&nbsp;</li><li>Exhibit D: Disclosure Statement Order&nbsp;</li><li>Exhibit E: Liquidation Analysis [See Docket No. 474 for amended version]</li><li>Exhibit F: Financial Projections&nbsp;</li><li>Exhibit G: Valuation Analysis</li></ul><p><strong>New Proposed Key Dates:</strong></p><ul><li>Voting Deadline: July 3, 2019</li><li>Confirmation Objection Deadline: July 5, 2019</li><li>Confirmation Hearing: July 10, 2019</li></ul>

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