Atlas Resource Partners, L.P. (OTCMKTS:ARPJQ) has confirmed a Restructuring Support Agreement (RSA) that will endeavor to reduce the Partnership’s debt by approximately $900 million. The RSA which will also diminish interest expense by $80 million per year is involving 100% Revolving Credit Facility lenders, 100% Second Lien Lenders and close to 80% of Senior Noteholders. There are several ways of accomplishing the debt reduction.

Alteration of the $668 million of the Partnership’s outstanding senior notes into 90% of the common equity of the reorganized company is one way of accomplishing the debt reduction mission. This will result in a 2% reduction of the cash interest expense payable on the Second Lien Term Loan once the restructuring proceedings begin. The Second Lien Term Loan holders will behold a 10% of the common equity of the merged company while 2% economic interest in the restructured company will go to a subsidiary of Atlas Energy Group, LLC.

The parties under RSA

Revolving Credit Facility is a secured and has a borrowing base of $440 million. The amount is broken into conforming and non-conforming tranche which are at $410 million and $30 respectively. Re-determination of the borrowing base is currently on suspension until May 1, 2017, when the non-conforming tranche will also gain its maturity.

Second Lien Term Loan has $250 million secured term loans. The principal amount is steady with the cumulative principal amount of the loan. The interest rate will at the outset be 2% payable in cash. There will be a 10% of the common equity in the rationalized company for lenders.

Senior Notes’ holders will be entitled to 90% of the common equity interests of the reorganized company. Apparently, the RSA terms do not outline any entitlement for the Partnership’s existing common and preferred unit holders.

Expected Results from the execution of the Restructuring Plan

Titan Energy, LLC will born. It will fall into a corporation for purposes of U.S the federal income tax. Ed Cohen and Jonathan Cohen will take up the roles of Executive Chairman and Executive Vice Chairman respectively. Daniel Herz will be the Chief Executive Officer while Mark Schumacher will become the President. The economic docket will be under Jeffrey Slotterback.

Nonetheless, the Restructuring Plan will only begin after the filing of a pre-packaged Chapter 11 bankruptcy by the partnership which must be followed by a court approval.

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