Memorial Production Partners filed with the U.S. Bankruptcy Court an Amended Joint Plan of Reorganization and related Disclosure Statement.
According to the Disclosure Statement, “The proposed restructuring transaction provides recoveries to all of the Debtors’ stakeholders. The Plan provides for a distribution of approximately $6 million to $12 million to holders of the Debtors’ prepetition equity interests, even though the holders of Allowed Unsecured Notes Claims will recover between only 22% and 40% of the value of their claims. The Plan accounts for this distribution to equity because the Debtors’ management and the Consenting Creditors worked hard to negotiate terms that were favorable to current equity holders and that granted them some recovery, even though they are otherwise entitled to no distribution.”
In addition, “Indeed, as set forth in the Liquidation Analysis….If the Debtors were liquidated and the proceeds distributed, current equity holders would receive no recovery. Additionally, because the Debtors operate as a master limited partnership, the conversion of equity would ordinarily result in a large tax liability to individual equity holders for the cancellation of debt. Hoping to avoid such an outcome, management negotiated tirelessly with the Consenting Noteholders to design a strategic multi-step transaction that would minimize adverse tax consequences to existing unitholders. Distributions of equity in the Reorganized Debtors would allow certain stakeholders to participate in potential future upside in the Reorganized Debtors. The proposed Restructuring has the additional benefit of ensuring that management remains highly committed to the future of the Reorganized Debtors.”
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