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June 4, 2019 − O'BENCO IV LP ("O'BENCO" or the "Debtor") filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Eastern District of Texas, lead case number 19-60384. The Company, a private, direct E&P investment vehicle with an existing investor base comprised of institutions, family offices and high net worth individuals, is represented by William A. Wood III of Bracewell LLP.
The Company’s petition notes between 50 and 100 creditors; estimated assets between $50mn and $100mn; and estimated liabilities between $50mn and $100mn. Documents filed with the Court list 16 unsecured creditors each having claims comprised of subordinated unsecured loans of between $300k and $600k.
Events Leading to the Chapter 11 Filing
In a short, terse declaration (time clearly being of the essence as Robertson County officials polished the gavel for a June 4th foreclosure sale) in support of the Chapter 11 filing (the “O'Brien Declaration”), William J. O'Brien IV, the Debtor's Chief Operating Officer, detailed the events leading to O'BENCO's Chapter 11 filing.
The O'Brien Declaration describes failed efforts to raise additional equity capital led by Sixpoint Partners which was followed by similar efforts by Houlihan Lokey Inc. ("Houlihan Lokey"), the latter ultimately unfruitful as well. The Houlihan Lokey effort then transitioned to a potential sale process the results of which underwhelmed the Debtor's senior lenders who eventually informed the Debtor of their intention to foreclose on substantially all of the debtor's assets and sell those assets at a June 4, 2019 public sale. Faced with that threat, and believing that a more organized effort under the auspices of a section 363 sale would maximize value for its creditors, the Debtor filed for bankruptcy protection.
Prepetition Capital Structure
The Debtor's prepetition capital structure consists of borrowings under a January 10, 2017 credit agreement with Associated Bank N.A. as the administrative agent (the "Credit Facility"). It is Associated Bank N.A. that was leading on the senior lenders' foreclosure efforts. Borrowings under the Credit Facility were $97.595mn as at the Petition date. The Debtor also has various unsecured subordinated promissory notes issued on or before February 9, 2019. As at the petition date, outstanding principal and interest on those notes was almost $12.6mn.
About the Debtor
The Debtor is a Delaware limited partnership established to provide an institutional quality, low cost platform for investors to participate in the oil and gas exploration and development space. The Debtor is owned by O'Brien Resources, LLC which is the managing member of O'BENCO IV, LLC, the general partner of the Debtor. The Debtor owns non-operating oil and gas working interests located primarily in east Texas, with additional non-operating interests in West Texas, Kansas, Arkansas, Louisiana and Mississippi. The core East Texas assets include a strong gas-weighted PDP foundation, with a compelling and technically de-risked stacked oil-weighted development opportunity. In total, as of December 31, 2018, the Debtor's real property assets covered approximately 87,413 net acres and approximately 130 gross producing wells. Additionally the Debtor owns approximately 90 miles of related midstream assets.
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