The U.S. Bankruptcy Court approved Key Energy Services’ Disclosure Statement and confirmed its Joint Prepackaged Plan of Reorganization.
According to documents with the Court, “[T]he Restructuring will, among other things, substantially deleverage the Company’s balance sheet by (i) paying down the Term Loan Claims in part in Cash and replacing the existing Term Loan Facility with a New Term Loan Facility in the principal amount of $250 million and (ii) converting $675 million principal amount of Senior Notes into 100% of the Reorganized Key Common Stock….The Company is planning to fund the Restructuring in large part with $85 million in proceeds from a fully-backstopped Primary Rights Offering (and, potentially, up to $25 million in proceeds from the fully-backstopped Incremental Liquidity Rights Offering (together with the Primary Rights Offering, the ‘Rights Offering’)) being offered concurrently with the Solicitation to qualifying Holders of Senior Notes and qualifying Holders of Existing Key Common Stock.”
Court-filed documents continue, “The deleveraging under the Restructuring will reduce the Company’s total funded indebtedness (including interest) by over 70% and will provide the Company with long-term financing and access to capital upon emergence to enable the Company to support its ongoing business needs upon the Debtors’ emergence from the Chapter 11 Cases….Further, although the total enterprise value of the Company on a reorganized basis does not support a Plan recovery to Holders of Existing Key Common Stock, pursuant to the terms of the settlement among the PSA Parties embodied by the Plan Support Agreement and the Plan, Holders of Allowed Existing Key Common Stock will have the opportunity to (i) receive 5% of the issued shares of Reorganized Key Common Stock (subject to dilution pursuant to the Plan and as indicated in Schedule 1 hereto) and the New Warrants (the ‘Equity Holder Plan Securities’), or (ii) elect to receive Cash, to the extent funded by Equity Holder Rights Offering Participants.”
The Court also approved Key Energy Services’ rights offering procedures and materials and entry into the backstop escrow agreement. This onshore rig contractor emerged from a previous bankruptcy in 1992 under the name National Environmental Group and subsequently changed its name to Key Energy Services. Key Energy Services October 24, 2016 Chapter 11 filing lists $1.3 billion in pre-petition assets.
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